India–US Trade Deal Explained: Greer's Visit, Section 301 Tariffs & a Shrinking Surplus

• The event: US Trade Representative Jamieson Greer led an American delegation to New Delhi for three days of talks with Commerce and Industry Minister Piyush Goyal, with both governments confirming a comprehensive review of the proposed Bilateral Trade Agreement and progress toward an interim deal anchored in the 7 February 2026 joint statement.

• Why the timing matters: The visit lands in the narrow window before two events that will reshape India's exposure to US tariffs — the expiry of temporary Section 122 tariffs on 24 July and the finalisation of fresh tariffs under Section 301. Securing favourable terms before that architecture hardens is central to India's strategy.

• Who Greer is: Greer is a long-standing protégé of Robert Lighthizer, the architect of the US tariff strategy and author of No Trade Is Free. He is known as a China hawk who views earlier trade liberalisation as having hollowed out US manufacturing, and he has publicly described India as a "difficult nut to crack" on agriculture while also calling India's offers among the best the US has received. In an op-ed analysis in The Indian Express (24 June 2026), Ravi Dutta Mishra framed Washington's posture as a "carrot-and-stick" approach — access to the lucrative US consumer market as the carrot, tariffs as the stick.

• What a tariff is: A tariff is a tax levied on imported goods. Governments use tariffs to protect domestic industry from cheaper foreign competition, to raise revenue, and increasingly as a bargaining tool to extract concessions in trade negotiations.

• International Emergency Economic Powers Act (IEEPA), 1977: An emergency statute that lets the US President regulate economic transactions during a declared national emergency. The US had used it to impose sweeping "reciprocal" tariffs on most trading partners and additional penalty tariffs on specific countries, including India.

• Section 122 of the Trade Act, 1974: A balance-of-payments provision allowing the President to impose import surcharges of up to 15% for a maximum of 150 days unless Congress votes to extend them. After the emergency tariffs were struck down, the US imposed a 10% global tariff under this route (later raised to 15%), which is set to lapse on 24 July.

• Section 232 of the Trade Expansion Act, 1962: Permits tariffs on imports that threaten US national security. It has been used for steel, aluminium, copper and automobile tariffs, and crucially has no time limit, remaining in force until the President lifts it.

• Section 301 of the Trade Act, 1974: Authorises the USTR to investigate and retaliate against foreign trade practices judged unfair, unreasonable or discriminatory. It is investigation-based and administered by the USTR, making it the favoured long-term tool to replace the invalidated emergency tariffs.

• The ruling: In Learning Resources, Inc. v. Trump (decided 20 February 2026), the US Supreme Court held by a 6–3 majority that IEEPA does not authorise the President to impose tariffs. Chief Justice John Roberts reasoned that the power to levy tariffs is fundamentally a branch of the taxing power, which Article I of the US Constitution reserves to Congress, and invoked the "major questions doctrine" — Congress does not delegate such consequential power through ambiguous language.

• What changed for India: The penalty tariffs imposed on India under IEEPA — a 25% reciprocal tariff plus an additional 25% linked to India's Russian oil purchases, together a punishing 50% — were declared invalid as imposed, opening the door to potential refunds. However, the relief is partly notional: Washington immediately pivoted to Section 122, 232 and 301 authorities to recoup the lost tariff revenue, so the underlying pressure on Indian exporters has not vanished.

• The investigation: In March 2026, the USTR launched two Section 301 investigations covering several dozen economies — one on the import of goods made with forced labour and another on "structural excess capacity" in manufacturing. In the forced-labour probe, the USTR proposed an additional 12.5% tariff on India and many other economies (with a lower 10% on a few), with hearings scheduled for early July.

• India's argument: The Global Trade Research Initiative (GTRI) has argued that the probe stretches beyond Section 301's intended scope, because it targets what India imports from third countries rather than market-access barriers faced by US firms inside India, and that the proposed rate breaches the United States' own WTO commitments. India has formally denied the allegations and is expected to contest the findings.

• Balance of trade: It is the difference between the value of a country's merchandise exports and imports with a partner. A trade surplus means exports exceed imports; a deficit means the reverse.

• India's unusual dependence: India runs a goods trade deficit with most of its top trading partners, and the US is the one major economy with which India enjoys a sizeable surplus. The US accounts for roughly 20% of India's exports but only about 7% of its imports, making the American market disproportionately important — and the surplus a key bargaining chip for New Delhi.

• Why it is narrowing: Months of steep US tariffs dampened the momentum of Indian exports, even as Indian imports of US crude oil, LNG, high-technology goods and electronic components rose sharply. The result is a steadily thinning surplus, which weakens one of India's traditional strengths at the negotiating table even as it eases political pressure in Washington over the bilateral imbalance.

• The subsidy asymmetry: US farmers receive far higher government support than Indian farmers, so subsidised American produce could enter the Indian market at prices domestic growers cannot match.

• Sensitive sectors: India has historically shielded agriculture and dairy from free-trade agreements to protect hundreds of millions of smallholder farmers. Sensitive items include certain row crops, dairy products and some meats, alongside concerns over genetically modified produce. Farm bodies such as the Bharatiya Kisan Union have publicly cautioned the government against opening these sectors.

• India's red line: Protecting farm livelihoods is a politically and economically non-negotiable concern, which is why agriculture remains among the hardest chapters in the negotiations.

• FDI versus FPI: Foreign Direct Investment (FDI) is investment that gives a lasting interest or management control in an enterprise — factories, subsidiaries, long-term stakes — and is relatively stable. Foreign Portfolio Investment (FPI) is investment in financial assets such as shares and bonds; it is highly liquid and often called "hot money" because it can exit quickly when sentiment turns.

• Gross versus net FDI: Gross FDI is the total foreign investment flowing in. Net FDI subtracts two outflows — repatriation and disinvestment by foreign investors, and overseas investment by Indian firms — and represents the actual net addition to India's investment stock. India's gross FDI hit a record $94.53 billion in 2025–26, yet net FDI was a mere $7.65 billion, because both repatriation and outward investment by Indian companies were very high. The gap shows why headline FDI figures can be misleading.

• The currency link: Weak net inflows, combined with foreign portfolio outflows after the West Asia conflict, put heavy pressure on the rupee, forcing the RBI to intervene in forex markets to defend the currency.

• India's asks: A competitive tariff rate relative to rival exporters in the new Section 301 structure, and a binding assurance that no further Section 301 action will be launched against India once the deal is signed.

• The US asks: Deeper access to Indian markets for industrial goods, farm and dairy products and digital trade; reduction of non-tariff barriers; and a large multi-year Indian commitment to buy US goods. From Washington's perspective, the talks are also about protecting and reviving the American industrial base.

• State of play: With the deal reportedly down to its final 1%, the remaining gaps are politically sensitive — chiefly agriculture, the tariff rate, and the scope of future Section 301 actions.

• India's negotiating task is to lock in a tariff rate that keeps its exporters competitive against rivals while protecting agriculture, dairy and smallholder livelihoods — the issues that have made the deal a "difficult nut to crack."

Securing a clear assurance against fresh Section 301 actions would reduce policy uncertainty, which is currently freezing capital expenditure and weighing on investment.

• Diversifying export markets through deals such as the India–UK and prospective India–EU and India–Canada agreements can reduce over-dependence on the US, which now absorbs nearly a fifth of India's exports.

• Strengthening domestic manufacturing competitiveness, deepening capital markets to retain investment, and pressing for reform of the multilateral trading system remain India's longer-term hedges against a more transactional and tariff-driven global trade order.

• A balanced outcome — one that is "commercially meaningful" for both sides without sacrificing India's strategic autonomy or farm interests — is the stated goal of both governments.