OPINION | Why India should re-negotiate the interim trade deal with the US

India may delay trade deal until midterms.

Over the course of a chaotic year since US President Donald Trump’s inauguration, it became almost routine to discover through Truth Social posts the imposition of ever-changing tariffs on the US’ trading partners.

IEEPA, its use and misuse

Tariffs have become a core defining agenda for Trump 2.0. Key to excessive executive overreach on matters of taxation (tariff is a form of tax on US citizens) has been a rather controversial interpretation of an old legislation — International Emergency Economic Powers Act (IEEPA), 1977.

It was this act which was used to impose reciprocal tariffs on numerous countries (including India) on the self-styled “Liberation Day” in April 2025. It was the same legislation that was used to impose a 25 per cent additional tariff on India for the import of Russian oil through a presidential executive order last year.

The basis of these broad-based tariffs on India — which were at a high rate of 50 per cent for months before India-US brokered a framework trade agreement earlier in February 2026 — is now outlawed in the US. The US Supreme Court (Scotus) has ruled out the use of IEEPA for imposing tariffs by the executive.

Interim Agreement and its embedded escape clause

New Delhi and Washington announced a “framework” trade agreement earlier this month while negotiations for substantive and granular trade deal are currently underway and are expected to continue for the coming weeks. New Delhi should cite the following provision of the US-India joint statement on the framework trade agreement to initiate re-negotiation: “In the event of any changes to the agreed upon tariffs of either country, the United States and India agree that the other country may modify its commitments.”

Dissonance about key aspects of the interim trade agreement

There are three primary issues with the trade agreement that New Delhi could bring up for re-negotiation or clarification.

First is the question of Russian oil. The US-India joint statement does not mention the issue of Russian oil. Instead, it is Trump's executive order and the US fact sheet, released on 6 and 9 February 2026, respectively, that link the removal of 25 per cent tariff to India’s “commitment” to stop buying Russian oil. The executive order states: “Specifically, India has committed to stop directly or indirectly importing Russian Federation oil…” India’s own press release capturing the takeaways of the framework deal has not mentioned Russian oil, while the Ministry of External Affairs has reaffirmed that country’s national interests will continue to guide oil purchase.

Given US Secretary of State Rubio’s statement on the Russian oil question during the recently concluded Munich Security Conference, it is unclear at this moment whether India’s commitment is to completely stop oil purchases from Russia or only halt additional purchases.

As I have argued in a Takshashila blog piece analysing the framework trade deal, “the fallouts and implications of the US dictating energy choices for a developing country that prizes its strategic autonomy for making energy security related decisions would be quite significant in the long-term.” Hence, India should bring up the question of Russian oil for clarification, and where necessary, re-negotiation.

Second, Indian negotiators should push for clarity and a shared understanding about the tariffs applicable to export of US agricultural products. The US fact sheet has been more wide-ranging in its claims.

Third, on digital trade, the Indian and US versions are at variance. While the US focuses on India reducing digital barriers to trade, India asserts that it is all for “supporting innovation while maintaining appropriate regulatory and national security safeguards.” Indian negotiators should push for the Indian version to be accepted as the commonly agreed one given the sovereignty implications involved.

Ignore the $500 commitment in renegotiation

While the figure of $500 billion worth import of US products has generated much consternation, India need not re-negotiate this aspect. This is because the US has already downgraded the language of India “commits” to much weaker India “intends” in the fact sheet. Very high figures bordering on the unrealistic are similar to what the EU announced last year in its deal with the US, or what Apple has been claiming since Trump’s first stint at White House — extraordinary “headline” numbers promised over a long-term horizon bereft of strict enforcement mechanisms.

Taking advantage of Trump’s imperfect alternatives 

It is not as if Trump is without options after IEEPA’s departure. Following the Scotus ruling, Trump used Section 122 of the Trade Act of 1974 to first impose a tariff of 10 percent and then hike it to 15 per cent for a temporary period of 150 days. But these are uniformly applicable tariffs and cannot be wielded in a discretionary manner similar to what we witnessed with IEEPA earlier. Further, beyond 150 days, Trump would need US Congress authorisation. It is possible, as a Moneycontrol report points out, that Trump may still find a way to reintroduce tariffs under Section 122 — but even then, the tariffs would be capped at 15 per cent, and applicable in a non-discriminatory manner. This would blunt to some extent Trump’s leverage.

While Trump could still use other options like Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, tariffs imposed under these legislations require investigations before application of tariffs. This means that “changes will be far slower and more deliberate” in the future, as Pranay Kotasthane points out in his latest edition of Anticipating the Unintended newsletter.

Wait-and-watch may be a prudent step in an election year

The Indian negotiating team has rightly postponed their trip to the US in light of the Scotus ruling. The Indian side would do well to cite the re-negotiation provision in the joint statement to iron out differences and reach a mutually beneficial trade agreement.

But given the altered domestic legal reality in the US, it would not be an unfathomable idea for the Indian side to dither on agreeing to a final, comprehensive trade deal until the conclusion of the mid-term elections later this year. An unfavourable mid-term result may strengthen the US Congress’ exercise of powers over taxation and tariffs, likely leading to a reduction of Trump’s leverage in negotiations with India.

(Lokendra Sharma is a staff research analyst with the Takshashila Institution’s High-Tech Geopolitics Programme.)

Views are personal, and do not represent the stance of this publication.