In a major development for bilateral economic relations, US President Donald Trump announced a new trade agreement with India after a phone call with Prime Minister Narendra Modi, under which the United States will reduce tariffs on Indian exports and both sides commit to deepening commercial cooperation.
Tariff Reduction: 25% to 18%
President Trump said the United States will roll back the reciprocal tariff on Indian goods from 25% to 18%, a move aimed at easing trade tensions that had previously escalated due to tariff hikes linked to crude oil purchases.
This tariff adjustment follows months of elevated duties — in some cases effectively up to 50% — which had created uncertainty for Indian exporters.
Energy and Trade Package: A Strategic Swap
According to the US president’s announcement, India agreed to halt or significantly cut oil imports from Russia and increase purchases of US energy products — a shift that Washington claims will weaken Russia’s financial leverage amid the ongoing Ukraine war.
Trump also highlighted India’s commitment to buy more American products across sectors including energy, technology, agriculture, and coal — with potential deals totaling over $500 billion.
India’s Response: A Warm Reception
Prime Minister Modi welcomed the tariff cut, expressing gratitude to President Trump and framing the move as a strengthening of cooperation between two of the world’s largest democracies. Modi emphasized that lower duties on Indian exports would benefit Indian manufacturers and workers.
Markets React Strongly
Indian financial markets responded positively to the announcement. The BSE Sensex surged by thousands of points, while the rupee strengthened against the dollar, reflecting renewed investor confidence following the tariff news.
Broader Context and Reaction
The tariff rollback and strategic alignment are seen by analysts as a reset in India–US economic ties, especially after previous tensions linked to trade barriers and energy policy disagreements. Lawmakers in the US have also lauded the agreement as a diplomatic win.
However, some experts note that details around implementation, timelines, and the specifics of tariff elimination on both sides remain to be finalized through formal procedures.
What Comes Next?
With the tariff cut effective immediately according to Trump’s announcement, technical and regulatory steps are expected to follow as both governments formalize the agreement. Officials from India and the US have indicated that ongoing talks will address remaining trade barriers as part of a broader strategic partnership.