US-India Trade Deal at Risk: 5 Major Obstacles That Could Derail the $500B Agreement

The US-India trade agreement announced Monday — reducing tariffs from 50% to 18%— faces significant implementation risks despite warm rhetoric from both leaders. Oxford Economics warns that President Trump's claims about India eliminating tariffs to zero, halting Russian oil imports, and increasing US imports to $500 billion remain unconfirmed by Indian authorities and "appear unrealistic," raising risks of US withdrawal. Key obstacles include agricultural sector protection, energy security concerns over Russian oil dependence, and ambitious procurement targets that experts consider unachievable given India's $720 billion total import volume and existing $94 billion trade deficit.

Why the US-India Deal May Not Survive Implementation

President Trump announced via Truth Social that he reached agreement with PM Narendra Modi, reducing US tariffs on Indian goods from 50% to 18%. Trump stated India committed to cutting tariffs on American goods to zero, replacing Russian oil with US supplies, opening agricultural markets, and procuring $500 billion in American products.
Modi's X response praised the 18% tariff reduction and thanked Trump—but notably avoided confirming Trump's specific claims about Indian commitments.
Alexandra Hermann, Lead Economist at Oxford Economics (USA), stated Trump's assertions remain "unconfirmed by Indian authorities" and "seem unrealistic," raising US withdrawal risks.
This wouldn't mark Trump's first reversal. Last month, Trump raised South Korean tariffs from 15% to 25% citing approval delays. Nomura warned Tuesday that while India's deal represents significant breakthrough, "no deal is guaranteed."

Agricultural Sector: India's First Official Pushback

India's first official deviation occurred Tuesday when Commerce Minister Piyush Goyal stated the deal would protect "agriculture and dairy sector interests."
Washington insists India will eliminate agricultural non-tariff barriers and remove most import duties. Wednesday, US Trade Representative Jamieson Greer stated India would reduce tariffs to zero on a "huge" agricultural set—nuts, wine, spirits, fruits, vegetables.
Agriculture provides livelihood for 42% of India's 1.4 billion population, making it politically explosive. Modi's 2021 agricultural reforms failed amid intense farmer protests.
India will likely maintain caution on large-scale tariff cuts in "politically sensitive areas like agriculture.
Three major regional elections approach—West Bengal, Tamil Nadu, Kerala—all governed by opposition parties with strong farmer lobbies.

Energy Security: The Russian Oil Problem

Questions arise about Washington's requirement for India to completely halt Russian oil purchases and replace them with American or Venezuelan supplies.

Wednesday, India's Trade Minister confirmed energy security remains government priority. Energy procurement decisions depend on market conditions and "changing international dynamics."
Despite US sanctions and Washington statements about suspended imports, Rystad Energy data shows Russia remains New Delhi's largest crude supplier—1.06 million barrels per day in January 2026.
The Kremlin insists New Delhi made "no statements" about halting Russian supplies.
India represents a price-sensitive buyer. India's reorientation away from Russian oil will likely lead to increased procurement costs.

Experts believe India unlikely to halt Russian imports given strategic and economic interests—yet this remains Washington's key requirement, potentially becoming another stumbling block.
For India, energy sector compromise could involve increased import costs and current account pressure amid persistent capital outflows.

The $500 Billion Procurement Challenge

Additional pressure comes from the commitment to purchase more American goods. India's total merchandise imports for fiscal 2025 totaled $720.24 billion, with $94.3 billion trade deficit. This includes only $45.3 billion in US goods.
Now the US administration wants India to procure half a trillion dollars in American defense, transport, energy, and agricultural products. Even with phased increases, experts consider this figure challenging.

India's Trade Minister hinted New Delhi could increase imports in energy, nuclear power, data centers, and aviation—but provided no details.
India could procure in these sectors, but achieving the $500 billion target is too large a task.


What are the main risks threatening the US-India trade agreement?
Oxford Economics identifies three risks: unconfirmed Indian commitments to zero tariffs, Russian oil halt, and $500B procurement appearing "unrealistic," raising US withdrawal risks.

Why is agriculture sensitive for India?
Agriculture provides livelihood for 42% of India's 1.4 billion population. Modi's 2021 reforms failed amid farmer protests.

The US-India trade deal faces substantial implementation risks despite initial positive reception. Agricultural protection, Russian oil dependence, and unrealistic procurement targets represent fundamental obstacles. Trump's South Korea reversal history combined with unconfirmed Indian commitments creates significant uncertainty.

By Claire Whitmore 
February 05, 2026

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