WASHINGTON/NEW DELHI: US President Donald Trump on Monday announced a trade deal with India that will significantly reduce US profits. India will stop buying Russian oil and lower trade barriers, in exchange for increasing tariffs on Indian goods from 50% to 18%.
President Trump announced the deal on social media after a phone call with Indian Prime Minister Narendra Modi, noting that India would buy oil from the United States and potentially Venezuela.
A White House official told Reuters that the United States would lift a 25% punitive tariff on all imports from India that it had imposed on top of a 25% “reciprocal” tariff over India’s purchases of Russian crude oil. U.S.-listed stocks of major Indian companies rose on the news. IT consulting firm Infosys closed 4.3 per cent higher, consultancy Wipro rose 6.8 per cent, HDFC Bank rose 4.4 per cent and iShares MSCI India Exchange Traded Fund rose 3 per cent.
President Trump’s announcement increased favorability towards semiconductor manufacturers and artificial intelligence, and major indexes rose into positive territory on the day. Prime Minister Modi also promised that India would “buy America at a much higher level,” in addition to buying $500 billion worth of U.S. energy, technology, agricultural products and other products, including coal, Trump added. Regarding India, President Trump said, “Both countries will similarly move forward to eliminate tariffs and non-tariff barriers to the United States.” Before President Donald Trump returned to power and raised U.S. tariffs to double-digit levels last year, India imposed the world’s highest tariffs, with a simple rate of 15.6% and an effective rate of 8.2%, according to World Trade Organization data. Few details were available President Trump’s truthful social messages provided few details, including a start date for tariff reductions, a deadline for India to end its purchases of Russian oil, reductions in trade barriers, and the U.S. products India has committed to purchasing.
As of late Monday afternoon, the White House had not issued the presidential proclamation or federal gazette required to make the changes official.
A White House spokesperson did not provide further details, and India’s commerce and foreign ministries did not immediately respond to requests sent after-hours. The Russian Embassy in Washington also did not respond to a request for comment.
Previous trade deals with other major Asian trading partners, including Japan and South Korea, included commitments to invest hundreds of billions of dollars in U.S. industry, but India’s announcement did not mention specific investments.
Madhavi Arora, an economist at MK Global, said the deal would give India “about the same tariff rate as Asian countries” of 15% to 19%, adding that it would remove an unfair drag on India’s exports and its currency, the rupee.
The Indian market has been hit since the imposition of tariffs by the US government, and a record exodus of foreign investors will make it the worst-performing market among emerging economies in 2025.
U.S. business groups reacted with alarm and criticism. The U.S. Chamber of Commerce, which has long advocated for an open-market trade agreement with India, praised President Trump’s announcement as progress toward that goal.
“We are optimistic that this is the first step towards a comprehensive trade agreement that will enable further collaboration in the private sector, and we look forward to working through the details of the agreement,” Chamber CEO Suzanne Clark said in a statement.
A coalition of more than 800 small businesses called We Pay the Tariffs urged Americans not to celebrate the deal, calling it a “600% tax increase on American businesses compared to 2024.” The group said U.S. tariffs on Indian imports were around 2% to 3% at the time, but are now 18% and could rise even higher if India does not completely withdraw from Russian crude oil.
Prime Minister Modi’s “huge gratitude”
“It’s great to be speaking to my dear friend President Trump today. I’m happy to announce that the tariffs on Indian-made products will be reduced by 18%,” PM Modi said in a post on social media X. “On behalf of the 1.4 billion people of India, a huge thank you to President Trump for this great announcement.” Piyush Goyal, India’s trade minister, said the deal would bring the U.S. and Indian economies closer together. “This agreement opens up unprecedented opportunities for farmers, MSMEs, entrepreneurs and skilled workers to make in India for the world, design in India for the world and innovate in India for the world. It will help India gain technology from the US,” Goyal said in a post on X. The deal comes less than a week after India signed a long-awaited trade deal with the European Union that is expected to eliminate or reduce 96.6% of tariffs on traded goods by value. Under the agreement, EU soybeans, beef, sugar, rice and dairy products are exempt from tariff reductions.
The Trump administration is rushing to conclude framework trade agreements with major trading partners before the U.S. Supreme Court rules on whether to eliminate President Trump’s “reciprocal” tariffs under the International Emergency Economic Powers Act.
Trump administration officials said they reached agreements with Taiwan last month that are expected to remain in place no matter what the courts decide, as they reimpose tariffs under other authorities.
oil in the western hemisphere
On Saturday, President Trump hinted at a possible deal for India to buy Venezuelan oil after the United States detained Venezuelan President Nicolas Maduro in a military raid in early January. The agreement followed months of tense trade negotiations between the world’s two largest democracies.
Last August, President Trump doubled tariffs on imports from India to 50% in a bid to pressure New Delhi to stop buying Russian oil, but earlier this month he said the tax rate could rise again if imports were not curbed.
The purchase of Venezuelan crude will help India, the world’s third-largest oil importer, replace some of the Russian crude it buys. India relies heavily on oil imports, meeting about 90% of its needs, and imports of cheaper Russian crude have helped cut import costs since Moscow invaded Ukraine in 2022 and Western countries imposed sanctions on energy exports.
India recently started reducing its purchases from Russia. Production is expected to fall from about 1.2 million barrels per day in January to about 1 million barrels per day in February and to about 800,000 barrels per day in March, Reuters reported. (Reporting by Bhargav Acharya in Toronto, David Lowder and Andrea Shalal in Washington, Aftab Ahmed in New Delhi; Writing by David Lowder and Susan Heavey; Editing by Doina Chiak, Michelle Nichols and David Gregorio)
