India to hold off on US trade deal amid new probe: Reuters

• Deal signing likely to be delayed by months, sources say
• India sees new probe as pressure tactic, source says
• Expect India to honour commitments made in early understanding, US says

India will hold off on signing a trade deal with the United ​States for several months, four Indian sources said, as fresh investigations by President Donald Trump’s administration into what it calls excess industrial capacity ‌among trading partners add new friction after an early understanding, opens new tab last month.

New Delhi had initially expected to sign an interim deal in March, followed by a full deal later, after Trump agreed in early February to cut punishing US tariffs on Indian imports in return for commitments including halting Russian oil imports, lowering duties on US goods and pledging to buy $500 billion worth of American products.

That ​timeline could now slip by several months, the sources said, although US officials say they expect India to honour its commitments. The Indian sources, all ​government officials with direct knowledge of the matter or briefed on it, declined to be named because they were not authorised ⁠to speak to media.

A spokesperson from India's trade ministry denied any hold off in bilateral engagement. "It is reiterated that the two sides remain engaged for a mutually beneficial ​trade agreement," the spokesperson added, without offering details on formal signing of the deal.

A White House official said the US was continuing to work with India on finalising ​a deal.

Negotiations lost momentum after the US Supreme Court in late February struck down Trump’s tariffs, the Indian government sources said, adding that there have been no substantive talks since, particularly as Washington has been preoccupied with the war on Iran. India never halted Russian oil purchases, only slowed them, and US officials are now urging New Delhi to increase buying to help ease a global energy crunch ​triggered by the conflict.

Complicating matters is a new US investigation into what it calls “structural excess capacity and production in manufacturing sectors” in 16 trading partners, including India.

"We are ​not in a hurry to sign any deal," said one of the sources. "The new investigation is a pressure tactic to force countries into signing deals after the court order. It's a spanner ‌in the ⁠works."

India would instead largely take a “wait and watch” approach as US tariff policy evolves, the source said, noting that Trump dropped a 25% punitive tariff on India after saying New Delhi had agreed to curb Russian crude imports, while India only said it would diversify its supply base. The overall tariff on India was 50% earlier, among the highest in the world.

The latest probe has been launched under Section 301 of the US Trade Act of 1974. India plans to present its case to the ​Office of the United States Trade Representative ​if permitted, or await a ruling ⁠before considering options such as approaching the World Trade Organization, the source said.

US expects India to honour commitments

The US ambassador to New Delhi, Sergio Gor, said Trump had multiple other tools to impose tariffs, including through 301.

"So we fully expect the nations that ​we've made deals with to honour those deals," he told a conclave organised by the India Today media group on ​Friday.

"I think India will ⁠do that because ... it's not just about honouring it -- it's a win-win situation."

Following the Supreme Court ruling, Trump imposed a 10% tariff on imports from all countries through July 24.

Under the early understanding, which a New Delhi-Washington joint statement called a "framework for an interim agreement", India's US exports were expected to face duties of 18%.

New Delhi is now seeking clarity ⁠on whether ​Washington would revert to that rate or apply a different level, one source said.

"It makes sense ​for India to slow down on trade talks," said Priyanka Kishore of Singapore consultancy Asia Decoded. "If you are at 10% tariff and these investigations are going through, it is better to hold out and see ​what they come up with, rather than proactively sign an agreement."