President Donald Trump on Monday announced what he described as a new “trade deal” with India that would significantly reduce United States tariffs on Indian goods, following a dispute over India’s purchases of Russian oil.
In a statement after a February 2 phone call with Indian Prime Minister Narendra Modi, Trump said the U.S. would lower combined tariffs on Indian imports from 50% to 18%. The reduction includes the removal of an additional 25% tariff imposed last year in response to India’s continued purchases of Russian crude oil, according to White House officials.
Trump framed the agreement as a breakthrough in trade relations between the world’s two largest democracies, whose combined gross domestic product totals roughly $33 trillion.
“As part of this deal, India will eliminate tariffs and non-tariff barriers on American goods and will purchase more than $500 billion worth of U.S. products,” Trump said, citing energy, technology, agricultural goods and coal among the sectors expected to benefit.
However, Indian officials have not publicly confirmed several of those claims.
In a post on X, Modi acknowledged that Indian exports to the U.S. would now face an 18% tariff and thanked Trump for the announcement. He did not reference a formal trade agreement, India’s Russian oil purchases, or any commitment to dramatically increase imports of U.S. goods.
India’s commerce minister, Piyush Goyal, said Tuesday that a deal would be signed “shortly” and that a joint statement would be released once the details are finalized, suggesting negotiations may still be ongoing.
The announcement comes after a year of heightened trade tensions under Trump’s global trade war, during which India was among the countries hardest hit by new tariffs. The U.S. is India’s largest trading partner, with bilateral trade totaling $129.2 billion last year.
In 2024, India exported nearly $87 billion in goods to the U.S., ranging from pharmaceuticals and textiles to machinery and jewelry. U.S. exports to India totaled about $41 billion, including aircraft, energy products, medical devices and agricultural commodities.
At the newly announced 18% rate, Indian goods would face lower U.S. tariffs than several regional competitors. Vietnam currently faces tariffs of about 20%, while Chinese imports are subject to 34% tariffs.
Still, some competitors maintain advantages. Countries such as Vietnam and Bangladesh benefit from the U.S. Generalized System of Preferences (GSP), which allows duty-free access for certain goods. India lost its GSP status in 2019 after the Trump administration determined it had not provided “equitable and reasonable access” to its markets.
Details of the U.S.-India agreement, including whether it constitutes a formal free trade agreement, remain unclear. No text of the agreement has been released, and officials from both countries have indicated that further announcements are forthcoming.
For now, the tariff reduction signals a potential thaw in trade tensions between Washington and New Delhi, even as questions remain about the scope and enforceability of the commitments described by the White House.
Foreign Policy News 