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- The US and India are close to securing a major trade agreement that could strengthen their economic ties following months of negotiations.
- Oil rose on newly imposed sanctions from the US on Russian oil companies.
- India’s recent summit in Beijing with Xi and Putin was viewed as an independent stance, as both the US and India aim to finalize a trade agreement during the ASEAN summit.
The US and India appear to be finalizing a trade agreement that could significantly strengthen their economic ties.
The potential deal follows months of negotiations and could lead to a possible tariff reduction on Indian exports to the US as India considers stopping purchasing oil from Russia – a key factor in negotiations.
Major Tariff Reductions on the Table
The US is considering reducing tariffs on Indian exports to around 15-16%, down from the current 50%. President Trump added more tariffs in August as a punishment for India’s continued purchases of Russian oil. ⁽¹⁾
If confirmed, it could mark the biggest tariff reduction in recent years between the US and India. The agreement would also see India importing more corn from the US, while maintaining a 15% tariff. Both nations are said to be working on a process that allows reviews of tariffs and market access over time.
Oil Diplomacy: India Caught Between US Sanctions and Energy Needs
The purchase of Russian oil has been an issue throughout the negotiations. Since the start of the Ukraine war in 2022, India has become the world’s second largest buyer of Russian oil, importing around 1.6 million barrels per day in the first half of 2025. ⁽²⁾
President Trump has repeatedly pressured India’s Prime Minister Modi to reduce Russian oil purchases, warning that India could continue to face massive tariffs if it does not stop the purchases.
Modi assured Trump that the purchases will stop, but will take time as India’s foreign ministry stated that India’s import policies are guided by safeguarding the interests of Indian consumers.
The Trump administration has recently imposed sanctions on Russia’s two largest crude companies, citing Moscow’s “lack of serious commitment to a peace process to end the war in Ukraine.” The Treasury Department said the new sanctions will harm Russia’s ability to raise revenue to fund its war against Ukraine. Oil rose 3% on Thursday as traders reacted to the news. ⁽³⁾
Indian officials claim that any reduction in Russian imports needs to be supported by a strategy to guarantee substitute supplies and stabilize international energy markets. But according to US officials, the cuts are necessary to keep Russia’s war revenue in check.
India Balances Powers Amid US–China–Russia Rivalry
India recently attended a trilateral summit in Beijing with China’s Xi Jinping and Russia’s Vladimir Putin. This move was viewed by the US as a sign of India’s pursuit of an independent foreign policy, which complicated negotiations between the US and India.
Despite tensions, recent statements from the US and India indicate progress. Final details of the trade agreement may be revealed during the ASEAN summit towards the end of October. The US and China will also meet there and hopefully reach another trade deal after previously threatening one another with additional tariffs and export controls. ⁽⁴⁾
Trade Relations and Economic Impact
India’s exports to the US increased 11.6% to $86.5 billion in March 2025, while imports increased 8% to $45.7 billion, bringing the two countries’ bilateral trade to a record $132.2 billion. ⁽⁵⁾
Assuming both countries can overcome the long-standing political and energy-related obstacles, the new agreement could strengthen trade and investment prospects between the two economic giants.
A successful deal would not only support economic ties but also help both nations counter China’s dominance in global trade and reinforce their positions as key players in the Indo-Pacific region.
