Top aide reveals why India-US trade deal collapsed amid tariff war

In a candid podcast with entrepreneur Chamath Palihapitiya, Lutnick asserted he had meticulously arranged the India-US trade pact, positioning it ahead of similar deals with Southeast Asian nations. However, he said the final hurdle, a direct call from Modi to Trump, never materialised. "It's all set up, but I gotta have Modi call the President... they were uncomfortable doing it, so Modi didn't call," Lutnick recounted, lamenting that India ended up "on the wrong side of the see-saw."

He emphasised the near-miss, noting the two sides were "very close" to inking the agreement, with Lutnick personally negotiating "at a higher rate" for India, implying superior concessions, before pivoting to pacts with Indonesia, Vietnam, and the Philippines.

The comments follow Trump's pointed remarks linking trade concessions to India's energy ties with Russia. Praising Modi as "a very good guy" who "wanted to make me happy," Trump warned of swift tariff hikes if New Delhi persisted. This echoes the 50% duties imposed on Indian imports in August 2025, explicitly tied to India's discounted Russian oil purchases amid the Ukraine conflict.

Washington views these trades as propping up Moscow's war chest, using tariffs as leverage to force a rethink. Lutnick's disclosure frames the stalled deal as a missed chance for India to ease this pressure through bilateral goodwill.

Escalation risks mount with the 'Sanctioning Russia Act of 2025,' championed by Senator Lindsey Graham and reportedly greenlit by Trump. This legislation mandates Trump to slap at least 500 per cent tariffs on all goods and services from nations, including India, knowingly trading Russian uranium or petroleum. Aimed at strangling Russia's revenues to halt its Ukraine offensive, the bill could devastate Indian exports if enforced.

India now faces a precarious balancing act: preserving strategic autonomy on energy without triggering economic retaliation from its largest trading partner. As Trump’s administration flexes tariff muscles, the absence of that pivotal Modi-Trump call underscores deeper trust gaps in bilateral ties.