ar
- The US and India announced a new trade deal, with tariffs on Indian goods reduced from 50% to 18%.
- India has pledged to stop its purchases of Russian oil and commit to buying US energy.
- India pledges to reduce its tariffs and non-tariff barriers against the US to zero.
President Trump has announced a new trade agreement with India that promises to reshape economic ties between the two nations after earlier negotiations fell apart late last year.
The deal, revealed following a phone call with Prime Minister Narendra Modi, includes substantial tariff reductions and commitments from India to shift its energy purchases away from Russia.
Immediate Tariff Cuts Take Effect
The centerpiece of the agreement involves a dramatic reduction in US tariffs on Indian goods.
Trump announced that the reciprocal tariff rate on India will drop to 18% from its previous level of 50%, effective immediately. This brings India’s tariff treatment more in line with other Asian trading partners like Japan and South Korea, who face rates between 15% and 19%. ⁽¹⁾
In August, Trump had imposed a 25% tariff on India specifically over its Russian oil purchases, which stacked on top of an existing 25% reciprocal levy on Indian goods entering the United States.
India’s Commitment to American Energy
Modi committed that India would stop buying Russian oil and instead purchase energy from the United States and potentially Venezuela. India has pledged to buy more than $500 billion worth of US energy products, including coal, along with technology, agricultural products, and other American goods. Trump emphasized that Modi agreed to “buy American goods at a much higher level.” ⁽²⁾
Questions About Implementation
While Trump’s announcement suggests the agreements will take effect without delay, several details remain unclear. The White House had not issued a presidential statement or Federal Register notice required to make the changes official. ⁽³⁾
The announcement left many questions unanswered, including the specific start date for lower tariff rates, deadlines for India to end Russian oil purchases, and details about which US products India has committed to purchasing.
Removing Trade Barriers
According to Trump’s announcement, India has also committed to reducing its tariffs and non-tariff barriers against the United States to zero. This would be a substantial change for India, which had maintained some of the world’s highest tariffs. ⁽⁴⁾
Legal and Political Questions
Some Democratic lawmakers and legal experts have questioned whether Trump can secure binding trade agreements without congressional approval, as he has done multiple times since returning to office.
Trump and his supporters maintain that Congress has granted the executive branch authority to make such deals. ⁽⁵⁾
Looking Ahead
The agreement comes after trade talks between the Trump and Modi administrations had stalled over issues including India’s continued reliance on Russian oil.
Economists suggest the deal could eliminate what had become a disproportionate drag on India’s exports and its rupee currency, particularly as Indian markets had become the worst-performing among emerging nations in 2025 due to record outflows of foreign investors.
