The US plans to end preferential trade status for India, under a scheme which allows certain products to enter the US duty-free.
President Donald Trump said India had failed to assure the US it would provide reasonable access to its markets.
India said the US move would have a "minimal economic impact".
The US will also end Turkey's preferential trade status, saying it no longer qualifies.
It is the latest US attempt to counter what it sees as unfair trade practices. Mr Trump has pledged to reduce US trade deficits, and has repeatedly criticised India for high tariffs.
As a result, he directed the US Trade Representative's (USTR) office to remove India from a programme that grants it preferential trade treatment.
Preferential trade treatment for India currently allows $5.6bn (£4.3bn) worth of exports to enter the United States duty free.
In a letter to Congress, the US president said India had "not assured the United States that it will provide equitable and reasonable access to the markets of India".
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