President Donald Trump said the U.S. had reached a trade deal that would see tariffs on Indian goods cut to 18 percent from 25 percent.
In a post on his Truth Social platform, Trump said India would remove trade barriers on U.S. products and stop buying Russian oil in return. As a result, an extra 25 percent tariff imposed on India as punishment for its purchase of Russian crude would be withdrawn as well.
Indian Prime Minister Narendra Modi said he was “delighted” with the deal, which followed months of strained trade talks.
“Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%,” he said on X. “Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement.”
Modi said the U.S. President’s “leadership is vital for global peace, stability, and prosperity”.
“I look forward to working closely with him to take our partnership to unprecedented heights,” he added.
A White House official told Reuters the U.S. would scrap the 25 percent penalty tariff imposed over Delhi’s purchases of Russian oil which was layered onto the existing 25 percent “reciprocal” tariff.
Trump had warned earlier this month the levy could climb further if India failed to cut those Russian imports.
The new deal and Delhi’s commitment to stop buying Russian crude means the U.S. tariff rate on Indian goods is set to fall to 18 percent, close to the 15 percent rate charged on the European Union and Japan.
The U.S. President also said Modi had pledged that India would buy more than $500bn worth of American goods, spanning energy, technology, agriculture and other sectors.
According to the Census Bureau, the U.S. ran a $53.5 billion trade imbalance in goods with India during the first 11 months of last year, meaning it imported more than it exported.
Trump has struggled to make good on a campaign pledge to quickly end the Ukraine war and has been reluctant since his return to office early last year to put pressure on Russian President Vladimir Putin. He has simultaneously imposed import tariffs without going through Congress to achieve his economic and foreign policy aims.
The announcement of the deal with India comes as Trump’s special envoy Steve Witkoff and son-in-law Jared Kushner are set to hold another round of three-way talks with Russian and Ukrainian officials in Abu Dhabi later this week aimed at finding an endgame to the war, according to a White House official.
Trump believes that targeting Russia’s oil revenue is the best way to get Moscow to end its four-year war in Ukraine, a view that dovetails with his devotion to tariffs.
Historically, India’s relationship with Russia revolves more around defence than energy. Russia provides only a small fraction of India’s oil, but the majority of its military hardware.
But when Western sanctions over the Ukraine war hit Russian oil exports, India used the moment to buy the discounted crude in large quantities, allowing it to increase its energy supplies.
The announcement of tariff reduction by Trump came less than a week after India and the EU unveiled a major trade agreement following nearly two decades of negotiations. The deal will enable free trade on almost all goods between the bloc’s 27 members and India, covering everything from textiles to medicines, and bringing down high import taxes for European wine and cars.
The deal between two of the world’s biggest markets also reflected a desire to reduce dependence on the U.S. after Trump’s import tax hikes disrupted established trade flows. Although the cost of Trump’s tariffs has largely been borne by American businesses and consumers, the taxes can reduce trade volumes among countries.
In recent months, India has accelerated a push to finalise several trade agreements. It has signed a deal with Oman and concluded talks for a deal with New Zealand.
Trump seemed to hint at a positive call with Modi Monday morning, posting to social media a picture of the two of them on a magazine cover.
When the pair met last February, the U.S. President said that India would start buying American oil and natural gas. But the talks proved frustrating and the tariffs imposed last year by Trump did little to initially change India’s objections.
While the U.S. has been seeking greater market access and zero tariffs on almost all its exports, India has expressed reservations on throwing open sectors like agriculture and dairy which continue to provide livelihood to the bulk of the country’s 1.4 billion population.
(Additional reporting by AP)
