In a big twist to India-US ties, a possible trade deal that could have boosted business between the two countries fell apart. The reason? Prime Minister Narendra Modi did not make a phone call to US President Donald Trump to seal it. This came out from US Commerce Secretary Howard Lutnick during a chat on the All-In podcast. For months, teams from both sides worked hard on a plan, but at the last step, India held back. Because of this, Trump went ahead and made deals with other Asian countries like Indonesia, Malaysia, the Philippines, and Vietnam. These deals had stricter rules. Now, India faces tough 50% tariffs from the US, mainly because of buying oil from Russia. Trump has said he has a good bond with Modi, but things are tense now. Some people say India’s strong stand shows smart thinking, especially with trade between the two nations touching about $190 billion. But many worry about what this means for jobs and growth in India.
The story started last year when talks looked promising. Both countries wanted to make trade fairer. The US was upset about high taxes India puts on some American goods. India wanted better access for its products like medicines and clothes. Things seemed on track until the call issue came up. Lutnick said India got three Fridays to finish the deal, but no call happened. Trump then slapped high tariffs in August 2025. This has made businesses think twice about deals between the two countries. Let’s look deeper into what happened and why.
Background of India-US Trade Talks
India and the US have been big trade partners for years. In 2025, trade between them grew to around $132 billion in the first part of the year, with full-year estimates close to $190 billion. India sells things like diamonds, drugs, and clothes to the US. The US sends planes, oil, and machines back. But there have always been fights over taxes. Trump called India the “tariff king” because India charges high duties on things like bikes and cars from America. In early 2025, both sides started talks to fix this. They even set a goal called Mission 500 to make trade hit $500 billion by 2030.
Negotiations went on for months. Teams met many times. By mid-2025, a basic plan was ready. It would cut taxes on many goods and make rules easier for businesses. The US wanted India to stop buying so much oil from Russia because of the war in Ukraine. India said it needs cheap oil for its people. Still, things looked good. Trump and Modi talked on the phone a few times. Trump said Modi is a “great guy” and his “friend.” But behind the scenes, pressure built up. The US gave India a deadline: three weeks to close the deal with a leader-to-leader call. India felt uneasy about it, maybe because it looked like giving in too much.
Howard Lutnick’s Big Reveal on the Podcast
The truth came out when Howard Lutnick spoke on the All-In podcast. Lutnick is a close friend of Trump and heads the US Commerce Department. He said he set up the deal himself. “It’s all set up,” he told Indian officials. “But you have to have Modi call President Trump.” He gave them three Fridays to do it. But India was “uncomfortable,” and the call never happened. Lutnick compared it to a staircase: the first country to agree gets the best terms. The UK did it fast and got a good deal. India missed out, so now any new deal would cost more.
Lutnick’s words shocked many. He said India came back later asking for the old terms, but it was too late. “Then—not now,” he replied. This shows how Trump does business: quick and tough. Lutnick also talked about a seesaw, saying India ended up on the wrong side. His chat on the podcast, which came out on January 9, 2026, spread fast. News sites like Reuters and Bloomberg reported it. It made people in India and the US think about why Modi didn’t call. Was it pride? Or worry about looking weak at home?
Trump has said nice things about Modi before. In one talk, he said, “Modi is a good friend, but he’s not happy with me because of the tariffs.” But now, tensions are clear. Lutnick’s story matches what others say: the deal was ready, but the final step failed.
The Heavy Tariffs Hit India Hard
After the missed chance, Trump acted fast. In August 2025, he put 25% tariffs on Indian goods as “reciprocal” taxes. That means matching what India charges the US. Then, he added another 25% because India buys oil from Russia. Total: 50%. This is one of the highest rates for any US partner. The US said it’s to pressure Russia over Ukraine. India buys about one-third of its oil from Russia—cheap and needed for 1.4 billion people.
The tariffs hurt Indian sellers. Things like steel, clothes, and drugs cost more in the US now. Exports dropped in some months. From April to November 2025, India sent $94 billion in oil, with Russia giving $30.8 billion. But after tariffs, some companies lost money. The US warned more tariffs could come—up to 500% on some items. Trump said on a plane, “We could raise tariffs on them very quickly.” India said no to stopping Russian oil. A government person said, “We will buy from where it’s best for our people.”
This fight shows bigger issues. The US wants India to side against Russia and China. India wants to stay neutral. Tariffs made trust break. Businesses in both countries worry. FDI from the US to India fell after August. Net FDI was strong at $10.7 billion till July but turned negative later.
US Shifts Focus to Other Asian Countries
While India waited, the US made deals elsewhere. In July 2025, Trump announced pacts with Indonesia and the Philippines. Then came Malaysia and Vietnam. These were “reciprocal trade” deals. They cut taxes and opened markets. For example, Malaysia agreed to buy more US cars and farm goods. Vietnam promised fair rules for US companies. Lutnick said these came after India’s miss. “We moved on,” he said.
The terms got tougher as time passed. Early deals like with the UK had low tariffs—around 15%. Later ones for Asia were 19-20%. India would face even higher if it tries now. This “staircase” way rewards fast movers. Indonesia targeted a deal by year-end 2025. Vietnam got a 20% tariff cut but had to stop some unfair practices. These deals help the US fight China too. They make supply chains away from China.
For India, this means lost chances. Other countries get better access to US markets. Indian goods now compete with higher costs. Some say India should have acted quicker. But others praise the stand: no rushing into calls that look like begging.
How This Affects Jobs and Economy in India
Trade with the US is key for India. It’s the biggest buyer—18% of exports. In 2025, goods trade was $128.9 billion, services $83.4 billion. Total over $200 billion some say. Tariffs hit hard. Indian firms like Reliance and Tata face higher costs. Jobs in export sectors—like textiles in Tamil Nadu or pharma in Hyderabad—could suffer.
But India fights back. It raised taxes on some US goods like nuts and apples. It also looks for new markets in Europe and Africa. Bilateral trade still grew 8% in 2024-25. India’s economy is strong, growing 7%. But long-term, missing the deal could slow tech ties. US firms like Google and Microsoft invest billions in India for AI and chips. Tariffs might scare them.
Trump’s rules on H-1B visas hurt too. Many Indians work in US tech. New limits mean fewer jobs. This adds to tensions. Modi government says it’s deft diplomacy: standing firm shows strength. A think tank person said, “India didn’t bow— that’s good for future talks.”
What People Are Saying: Quotes from Leaders
Leaders have spoken out. Trump said in August 2025: “Modi knew I wasn’t happy with the oil buys. We can raise tariffs fast.” But he added, “He’s a great leader.” Modi hasn’t said much directly. In one speech, he talked about “strong ties” but stressed “India first.” India’s trade minister said, “We negotiate on equal terms.”
Lutnick’s quote: “Modi didn’t call, so the deal didn’t happen.” This got reactions. An Indian expert said, “It’s ego over economy.” US Senator Lindsey Graham backed tariffs: “It worked—India buys less Russian oil now.” But data shows India still buys a lot. A Modi aide privately said, “We won’t let personal calls dictate policy.”
Some praise India. A news piece said, “Firm stance amid $190B trade shows deft moves.” Trump in December 2025 hinted at fix: “We’ll work it out with Modi.”
India’s Strong Stand: Smart or Risky?
Many see India’s choice as bold. Not calling shows no weakness. Amid China tensions, India needs options. Russian oil saves money—$5 billion less cost. Stopping it would raise fuel prices for Indians. Diplomacy wise, Modi met Trump in February 2025 for Mission 500. But after tariffs, talks slowed. India sent teams to Washington. A deal might come in 2026, but on worse terms.
Risks are there. US-Pakistan ties warmed in 2025. Trump claimed he stopped India-Pakistan fight in May—Modi denied. This irks India. Bangladesh issues add worry. But silver lining: China ties improved. Russia stays friend.
Future looks mixed. Talks continue. A small pact by end-2025 could cut some tariffs. But trust is low. India must balance pride and profit.
What Lies Ahead for India-US Ties
2026 could bring change. Trump wants wins. If India cuts Russian oil a bit, tariffs might drop. Tech partnership is strong—US invests in Indian startups. Defense ties grow too. But trade fights could spill over. India pushes for WTO rules. US ignores sometimes.
Experts say talk more. Modi-Trump meet could help. But no date yet. Bilateral trade might hit $500B, but slower now. India diversifies: more trade with UAE, Europe. US needs India against China. So, fix likely. But 2025 showed: personal bonds matter, but policy more.
In end, missed call highlights how leaders’ choices affect millions. India stands firm, but at cost.
FAQs
Why did India miss the US trade deal?
India missed the deal because PM Modi did not make a direct call to President Trump to finalize it. US Commerce Secretary Howard Lutnick said negotiations were complete, but India felt uncomfortable with the call. They had three Fridays to do it, but it didn’t happen. As a result, the US moved on to other countries.
What are the US tariffs on India and why were they imposed?
The US imposed 50% tariffs on Indian goods in August 2025. This includes 25% as reciprocal tariffs to match India’s duties on US products, and another 25% as punishment for India buying oil from Russia. The US wants to pressure Russia over the Ukraine war. Trump warned more tariffs could come if India doesn’t stop.
How has this affected India-US trade?
Trade is still strong at about $190 billion, but tariffs make Indian goods costlier in the US. Exports in some sectors dropped. FDI from the US fell after August. But overall, trade grew 8% last year. India is looking for other markets to balance.
What deals did the US make with other Asian countries?
After India, the US signed reciprocal trade deals with Indonesia, Malaysia, the Philippines, and Vietnam in 2025. These cut tariffs and opened markets for US goods. Terms got stricter over time. For example, Vietnam agreed to 20% tariffs and fair rules. Malaysia promised to buy more US cars.
Is there hope for a future India-US deal?
Yes, talks continue. A small pact might happen by end-2025 to cut some tariffs. But terms will be tougher now. Trump and Modi have spoken, and both want to fix things. Reducing Russian oil buys could help. But trust needs rebuilding.
How does this impact ordinary Indians?
Higher tariffs mean fewer exports, which could affect jobs in factories and farms. Fuel prices stay low thanks to Russian oil, but if forced to stop, costs rise. Tech jobs in the US might be harder due to visa rules. But India’s economy is growing, so impact might not be too bad.