September 29, 2026: A US-India trade deal could protect India from the full 100 per cent tariff authorised under the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, while also shielding it from potential action in the ongoing Section 301 investigation on excess capacity, sources close to the negotiations said.

“The legislation authorises the US President to impose the tariff but does not enforce it, giving him a lot of room to negotiate trade. Any negotiated trade deal would cap the amount mentioned in the bill,” a source tracking the matter told businessline.

Uncertainty over further US trade action has grown since President Donald Trump signed the Graham Act, which allows tariffs of up to 100 per cent on the largest buyers of Russian oil and gas — a list that includes India. 

The source said that while the Graham legislation did aim at addressing Russia’s revenues and its ability to continue the war in Ukraine, it would not supersede a trade deal. “In terms of the bilateral tariffs and the trade deal, it doesn’t supersede,” they underlined.

Delaying a trade deal may also be leaving India increasingly exposed to other pending US trade actions, the source added. “There’s consequences. Every week that there’s no trade deal, India may be a little bit more vulnerable to other pending actions,” the source noted.

Had a trade agreement already been concluded, India’s position following the passage of the sanctions legislation would have been clearer.

“Even before the Graham bill was passed, the potential for the Graham bill was there. And if there was a trade deal, while India would have been reported as a top buyer, it could have been protected because of the deal,” the official said.

Similar protection could apply to the outcome of the USTR’s Section 301 investigation into excess capacity, the source said. “Everyone’s waiting for the Section 301 results. But if India had a trade deal, we wouldn’t need to worry about whenever it comes out. The agreement would have accorded protection”

While New Delhi has been saying that the trade deal has mostly been negotiated, it maintains that it will finalise it only if guaranteed an edge over competing economies such as Vietnam, Bangladesh and Indonesia.

The source said Washington has the ability to adjust existing arrangements as needed, pointing to the Section 301 forced-labour case as precedent: India was initially slated for the higher 12.5 per cent tariff but ultimately secured the lower 10 per cent rate, gaining an edge over China, Vietnam, Thailand and the Philippines, which remained at 12.5 per cent. “Something similar can always be worked out,” the source said.

On Russian oil, India has indicated that it has no intention to stop its purchase as it was essential for the energy security of its 1.4 billion population.

(Source: Business Line)