New Delhi: The US has announced a new trade understanding with India that includes lower reciprocal tariffs and expanded market access, with US President Donald Trump claiming that New Delhi would also reduce purchases of Russian oil and significantly increase imports of American goods.
The Indian government has confirmed the tariff reduction element of the announcement. Prime Minister Narendra Modi welcomed the move following a phone call with President Trump on 2 February, while Union Minister Ashwini Vaishnaw described the development as a “win-win” for both countries.
According to Modi, Indian exports to the US will now face a reduced tariff of 18 per cent, replacing the earlier reciprocal tariff of 25 per cent. The new rate is also lower than the 19 per cent tariff faced by Pakistan. In a post on social media, Modi said the decision would benefit Indian businesses and consumers, adding that cooperation between the world’s two largest democracies unlocks significant opportunities for mutual growth.
The announcement marks a breakthrough after nearly a year of difficult negotiations that had strained bilateral trade ties and left Indian goods facing some of the highest US tariffs globally. However, while Modi confirmed the tariff relief, he did not explicitly refer to a broader trade deal or comment on claims related to Russian oil purchases or zero tariffs on US goods.
In contrast, Trump said in a post on Truth Social that the agreement went beyond tariff cuts. He claimed that India would move to reduce both tariff and non-tariff barriers on US goods to zero and commit to purchasing more than $500 billion worth of American energy, technology, agricultural products, coal and other goods.
Trump also asserted that India had agreed to stop buying Russian oil and instead source more energy from the US and potentially Venezuela, linking the move to efforts to end the Russia-Ukraine conflict.
Pankaj Mohindroo, Chairman, ICEA, said: “This is a positive and competitive outcome for India. At the agreed 18 per cent rate, India remains well placed relative to key manufacturing peers and retains its attractiveness as a global manufacturing and export hub. While we await the finer details of the deal, the direction clearly supports India’s strategy of scaling manufacturing and integrating deeper into US-led global value chains, particularly in electronics. This outcome reflects the steady leadership of the Hon’ble Prime Minister, the Hon’ble Commerce and Industry Minister, and the Commerce Secretary, who have navigated complex negotiations with clarity and finesse. We see strong potential for expanded technology collaboration and envision electronics trade reaching $100 billion within the broader $500 billion India–US trade ambition.”
Discussion about this post