India-US trade deal: Trade agreements are written to survive governments. That assumption sits uneasily with current American trade policy. India and the United States are trying to close an interim trade deal at a time when Washington is using tariffs, court-tested powers and Section 301 investigations as live negotiating instruments.
India is exploring an automatic review mechanism in the proposed interim agreement. If accepted, the pact would come up for review after a fixed period instead of continuing indefinitely. That would be unusual for a modern trade pact. It would also be sensible.
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India-US trade deal and tariff risk
New Delhi’s immediate aim is clear. It wants preferential access to the US market on terms better than those offered to competing Asian exporters. Reuters reported on June 22 that India is seeking a tariff edge over regional peers, including Vietnam and ASEAN economies, as USTR Jamieson Greer heads into a fresh round of talks with Indian officials.
That demand is not cosmetic. A trade deal that gives India the same or worse treatment than its competitors will not help labour-intensive exports. Textiles, leather, engineering goods, chemicals and food products compete on narrow margins. A few percentage points in tariff differential can decide orders.
The risk is that India may accept commitments today while Washington offers better terms to other economies tomorrow. The United States has already proposed different tariff treatment under its forced labour-related Section 301 process. India and several others face a proposed 12.5% additional duty, while economies such as Indonesia and Pakistan fall in the 10% category under the USTR proposal.
A sunset clause would give India a contractual route to reopen commitments if the tariff advantage disappears.
EU-US sunset clause offers a precedent
The European Parliament has already written this logic into its own arrangement with Washington. The EU-US tariff deal approved in June includes a sunset clause under which tariff preferences expire on 31 December 2029 unless both sides renew them. The European Parliament also built in safeguards on steel, aluminium derivatives, industry and agriculture.
Europe accepted an imperfect deal because it wanted stability. It also refused to leave the arrangement open-ended. That is the part India should study.
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The EU clause requires an assessment before renewal. It allows Brussels to judge whether concessions have worked for industry, farmers and smaller firms. It also gives Europe room to respond if the United States changes course. India needs a similar date on the calendar.
Section 301 makes review necessary
The US tariff environment is no longer governed only by negotiated schedules. USTR initiated Section 301 investigations in March into structural excess capacity and production in manufacturing sectors. The inquiry covers several economies and can lead to new trade action if Washington concludes that foreign policies burden US commerce.
India has already pushed back against the allegation of surplus capacity in sectors such as textiles and steel. Indian officials have argued that production must be judged against India’s population, domestic demand and development needs.
This matters for the proposed trade pact. If India secures tariff preferences now, those preferences may lose value if Section 301 action later adds duties on Indian exports. The same problem will arise if Washington uses forced labour findings or product-specific probes to change the effective tariff rate after the deal is signed.
A sunset clause would not block the United States from using its laws. It would stop India from being locked into a bargain whose commercial basis has changed.
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ASEAN FTA explains India’s caution
India’s caution also comes from its own FTA record. The ASEAN-India goods agreement came into force in 2010. Since then, India’s imports from ASEAN have grown faster than its exports. ORF estimates that between FY2009 and FY2023 India’s imports from ASEAN rose 234.4%, while exports increased 130.4%. The deficit widened from about $7.5 billion in 2011 to roughly $44 billion in 2023.
The ASEAN experience does not prove that trade agreements are harmful. It shows that weak review provisions can leave domestic industry with little room when import patterns shift. Electronics, chemicals, machinery and palm oil became recurring concerns for Indian producers. Corrective action came late and remains difficult.
That history should inform the US negotiation. India should not sign an open-ended pact in a market where the other side is actively rewriting tariff rules.
Sunset clause as trade discipline
Agriculture remains a difficult part of the India-US negotiation. Washington wants wider access for American farm products. Medical devices, digital trade, e-commerce rules and industrial tariffs are also on the table. Each involves domestic regulation as much as market access.
India can make concessions where they serve its interest. It should also insist that concessions are reviewed against measurable outcomes. Did Indian exporters retain a tariff edge? Did the US offer better terms to rivals? Did promised market access translate into orders, investment or supply-chain gains? Did later US tariff action alter the bargain?
A sunset clause would force those questions before renewal. It would give both governments a disciplined way to assess the pact without turning every dispute into a diplomatic crisis.
The India-US trade deal should not be treated as a permanent settlement in an unstable tariff regime. It should be a time-bound bargain, with review built into the text.