India-US trade relations face tension amid proposed US tariffs

India and the United States are navigating complex dynamics regarding a proposed Bilateral Trade Agreement (BTA). While US Ambassador to India Sergio Gor reported “real progress” and noted that the two nations are partnering on various sectors to build supply-chain resilience, new legislative and policy developments in Washington present significant challenges.

In the US Senate, the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 passed with an 86-11 vote. The bill proposes tariffs of up to 100 percent on goods from countries that are major importers of Russian crude oil or natural gas, or those facilitating the evasion of Russian oil sanctions. As the second-largest buyer of Russian crude, India is a primary target of this legislation.

Additionally, a US proposal to impose 100 percent tariffs on generic medicines starting in 2028—unless firms reshore operations to the US—threatens India’s pharmaceutical industry, which relies heavily on the US market.

In response to these tensions, Indian Commerce and Industry Minister Piyush Goyal has proposed the creation of dedicated “plug-and-play” industrial smart cities and specialized zones tailored specifically to the requirements of US companies to encourage investment and deepen manufacturing integration.