US and India Announce Trade Deal, Tariff Reductions
The United States and India have reached a trade agreement that will see the US lower tariffs on Indian goods, a move hailed by both President Donald Trump and Prime Minister Narendra Modi. The deal, announced on , represents a significant easing of tensions between the two countries and offers relief to the Indian economy.
President Trump announced the agreement via social media, stating he would reduce the 25% tariff on Indian goods to 18%. This decision follows a phone call with Prime Minister Modi, during which Modi agreed to halt purchases of Russian oil and increase imports from the US, and potentially Venezuela. “Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India,” Trump posted. He added that India will also “move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO.”
The US is also removing an additional 25% duty previously imposed on certain Indian exports in response to India’s purchases of Russian crude oil. This punitive tariff had been a point of contention, with the US arguing it indirectly financed Russia’s war in Ukraine.
Prime Minister Modi confirmed the agreement on X, stating, “Delighted that Made in India products will now have a reduced tariff of 18%.” He expressed gratitude to President Trump on behalf of India’s 1.4 billion citizens, emphasizing the benefits of cooperation between the two largest democracies. Modi also highlighted Trump’s “leadership” as vital for “global peace, stability, and prosperity.”
Economic Impact and Market Reaction
The announcement triggered positive market reactions. Futures on India’s benchmark stock index, the Nifty 50, surged as much as 3.8% in trading at the Gujarat International Fin-Tec City. The US-listed iShares MSCI India ETF also saw gains, rising as much as 2.4%. The Indian rupee rallied in offshore trading, gaining 1% against the dollar.
The move provides significant relief for India, which had been seeking a lower tariff rate from Washington for months. Trump’s previous tariffs, reaching 50% on some goods, were the highest imposed on products from any major trading partner. These high tariffs impacted approximately 55% of India’s exports to the US and threatened the country’s ambitions to become a manufacturing hub.
Trump stated that India has committed to purchasing “over $500 BILLION DOLLARS of US Energy, Technology, Agricultural, Coal, and many other products” as part of the agreement.
Background to the Deal
The trade deal comes after several months of negotiations. In late August, the Trump administration had imposed the 50% tariffs on a range of Indian exports, including the 25% penalty linked to purchases of Russian oil. The US had argued that India’s continued reliance on Russian oil was undermining international efforts to pressure Russia over its invasion of Ukraine.
The agreement follows a similar recent trade deal between India and the European Union, reached after nearly two decades of on-off talks.
