The USTR advanced one trade probe targeting India's digital-services tax but left a second investigation unresolved, creating uncertainty for Indian exports and bilateral trade talks.
The US Trade Representative moved ahead with one of two trade probes targeting India and several other countries, leaving the second investigation in limbo and creating a fresh layer of uncertainty for New Delhi's export outlook.
The active probe examines digital-services taxes that India and other nations impose on US tech companies. The second investigation, which covers a broader set of trade barriers, has not been formally dropped but has not advanced either, according to the USTR's latest public docket.
India's digital-services tax applies a 6% levy on revenue from online advertising, e-commerce platforms, and streaming services provided by non-resident companies. The US has argued the tax discriminates against American firms such as Google, Meta, and Amazon. The USTR probe could lead to retaliatory tariffs on Indian exports if the two sides fail to reach a settlement.
The unresolved second probe covers issues including data-localization requirements, intellectual property rules, and agricultural tariffs. Trade lawyers following the case said the USTR's decision to advance only the digital-tax investigation suggests Washington sees that as the more actionable complaint, while the broader set of grievances may require bilateral negotiation rather than a formal trade action.
India's commerce ministry has not commented on the USTR's latest move. New Delhi has previously defended the digital-services tax as a non-discriminatory measure applied equally to domestic and foreign companies, though in practice the levy falls almost entirely on US-headquartered platforms.
The uncertainty matters for Indian exporters of goods that could be targeted in retaliation. During the Trump administration, the US threatened tariffs on Indian textiles, leather goods, and pharmaceuticals in a separate trade dispute. The current probe gives Washington similar leverage.
A settlement remains possible. India and the US have been negotiating a limited trade deal for months, covering tariff reductions on select goods and improved market access for agricultural products. The digital-tax dispute has been a sticking point, with the US seeking either a repeal of the levy or a commitment from India to join a multilateral framework being developed by the OECD.
The OECD framework, which would replace unilateral digital-services taxes with a global minimum tax on large multinationals, has not been finalized. India has participated in the talks but has not committed to scrapping its own levy before an international agreement takes effect.
For now, the USTR's decision to advance one probe and leave the other dormant gives both sides room to negotiate without an immediate escalation. The next concrete marker is the USTR's public hearing on the digital-services tax, scheduled for January 2026.
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