The United States has communicated to India that progress on a trade deal is contingent upon India reducing its imports of Russian oil. US trade negotiators have made it clear to their Indian counterparts that resolving the issue of Russian oil purchases is crucial for lowering India's tariff rate and finalizing a trade agreement.

Recent trade talks between India and the US have been described as constructive, but disagreements persist over India's continued reliance on Russian energy. The US is pressuring India to reduce its dependence on Russian oil, while India is offering concessions such as increased purchases of American goods and easing restrictions on genetically modified corn.

The US stance is that India's purchases of Russian oil are indirectly funding Russia's war in Ukraine. US Energy Secretary Chris Wright stated that India's procurement of Russian oil indirectly funds atrocities in Ukraine and that India has plenty of alternative sources. He also mentioned that the US doesn't want to punish India, but wants to end the war and grow relations with India.

In August 2025, the US announced an additional 25% tariff on Indian imports, citing India's purchase of Russian oil as a reason. This additional tariff brought the overall tariff on most Indian goods to 50%. The US represents the largest market for Indian exports, receiving over $80 billion worth of goods in 2022, which are now subject to these higher tariffs.

India has conveyed to the US that significantly reducing Russian oil imports would require Washington to allow crude purchases from sanctioned suppliers like Iran and Venezuela. External Affairs Minister S Jaishankar has called the demand to stop buying Russian crude "unjustified and unreasonable," noting that Europe trades far more with Russia.

Despite the tensions, both countries are working towards a mutually beneficial trade agreement. India and the US are discussing the possible contours of a trade deal, and a delegation led by Commerce and Industries Minister Piyush Goyal has held meetings with US government officials. Both sides have agreed to continue engagements to reach an early conclusion of a mutually beneficial agreement. U.S. businesses and investors have expressed strong confidence in India's growth and interest in expanding their activities there.

Sergio Gor, U.S. Ambassador-designate to India, has stated that getting India to stop buying Russian oil is a "top priority". He indicated that President Trump has made it "crystal clear" that India must end all imports of Russian oil.

The trade negotiations have faced challenges, including India's refusal to grant the US unhindered market access to its politically sensitive agriculture and dairy sectors. India has reservations over the US demand for opening up these sectors.

The US trade deficit with India stood at $42.7 billion in 2024. The US remains India's largest trading partner, with bilateral trade valued at $131.84 billion in 2024-25. The aim is to more than double the bilateral trade to USD 500 billion by 2030.