President Donald Trump mentioned he would roll again punitive tariffs on India in return for an settlement that Prime Minister Narendra Modi would cease shopping for Russian oil, easing months of stress between the 2 nations.
Following a cellphone name with Modi, Trump mentioned on social media that he would minimize a US levy on Indian items to 18% from 25%. The US president can also be eradicating an additional punitive 25% responsibility utilized in response to India’s purchases of crude from Russia, in response to officers acquainted with the matter.
India would “transfer ahead to cut back their Tariffs and Non Tariff Boundaries in opposition to the USA, to ZERO”, Trump wrote, in addition to buy “over $500 BILLION DOLLARS of U.S. Power, Know-how, Agricultural, Coal, and lots of different merchandise.”
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Modi confirmed the pact, posting on social media that “Made in India merchandise will now have a decreased tariff of 18%.” He didn’t present additional particulars on oil or on agricultural imports, a significant sticking level for New Delhi.
Fantastic to talk with my pricey pal President Trump right this moment. Delighted that Made in India merchandise will now have a decreased tariff of 18%. Massive because of President Trump on behalf of the 1.4 billion folks of India for this excellent announcement.
When two giant economies and the…
— Narendra Modi (@narendramodi) February 2, 2026
India has not historically been an importer of Russian crude, however emerged as a key purchaser within the aftermath of Moscow’s 2022 invasion of Ukraine, as commerce flows have been upended and reductions turned enticing. The Trump administration’s efforts to choke off Russia’s flows to India have slowed shipments, however not halted them.
In October, Trump additionally introduced Modi had agreed to stop purchases of Russian oil. And not using a agency commerce deal in place, although, Indian refiners continued to purchase low-cost crude from Moscow. Later the identical month, the US imposed sanctions on Russia’s largest oil producers, Rosneft PJSC and Lukoil PJSC, diminishing urge for food extra considerably.
The information provides important reduction for New Delhi, which has hunted for months to barter a decrease charge with Washington. India ships virtually a fifth of its complete exports to the US and Trump’s tariffs of fifty% amounted to the best charge on merchandise from any main buying and selling accomplice.
The discount may enhance India’s attractiveness as a substitute manufacturing hub to China. At 18%, India’s tariff is decrease than Vietnam’s 20% charge and the 19% for many of Southeast Asia.
“The 18% tariff brings the speed in line to India’s friends,” mentioned Garima Kapoor, an economist at Elara Securities India Pvt Ltd. It’s more likely to “generate constructive tariff differential for India,” she mentioned.
The change may additionally enhance Indian GDP progress by round 0.2 to 0.3 share factors this 12 months, pushing it nearer to 7%, in response to Shilan Shah, deputy chief rising market economist at Capital Economics. wrote — versus Capital Economics’s present forecasts for progress of 6.5% for each 2026 and 2027.
“There could possibly be geopolitical ramifications too,” Shah wrote. “Many in India would favor to stay strategically unaligned, but when this rapprochement proves sturdy, India would seemingly gravitate again into the US bloc.”
India’s benchmark inventory index Nifty 50’s futures traded on the Gujarat Worldwide Fin-Tec Metropolis surged as a lot as 3.2% in skinny buying and selling, whereas the US-listed iShares MSCI India ETF rose 3%. The rupee rallied in offshore buying and selling, gaining 1% in opposition to the greenback.
“Whereas satan is within the particulars, it removes a dangling sword over rupee, fairness and charges market,” mentioned Nilesh Shah, managing director at Kotak Mahindra AMC. “Allow us to hope that it’s a win-win deal for each the nations as they’ve lot to realize by cooperation.”
The US is India’s largest export market, and the brand new levies have damage labor-intensive industries together with textiles, leather-based, footwear, and jewellery. The most recent commerce figures present exports down almost 12% in October from a 12 months earlier, with the commerce deficit hitting a file.
Prolonged Talks
India was among the many first to open commerce talks with the Trump administration, however ties soured after the US president repeatedly claimed credit score for a ceasefire between India and Pakistan, an assertion that rankled officers in New Delhi. The tariffs additional strained relations.
Indicators of a thaw between the 2 economies emerged after Trump known as Modi on his birthday in September, ratcheting down tensions and seeing the nations resume stalled commerce talks. The US president in November mentioned he may go to India on the urging of Modi.
However it wasn’t instantly clear a deal was imminent earlier than Trump and Modi’s cellphone name. US Commerce Consultant Jamieson Greer mentioned final Tuesday that whereas India had “made quite a lot of progress” on curbing Russian oil buys however “they nonetheless have a methods to go on this level.”
The deal’s element will nonetheless current challenges for either side, with questions over the precise scale of the discount required of India’s refiners — and the problem of agricultural imports and purchases of genetically modified crops. Farmers are amongst Modi’s largest and most vocal constituencies.
Nonetheless, India has taken steps to appease Trump. India’s oil minister mentioned not too long ago that state refiners had signed their first long-term deal to import American liquefied petroleum gasoline.
In his Fact Social submit Monday, Trump mentioned Modi had additionally agreed to probably purchase extra oil from Venezuela. Indian Oil Corp., the nation’s largest refiner, may add Venezuelan crude to its food regimen, an government on the state-owned agency mentioned final week.
Venezuelan purchases are more likely to stay peripheral in comparison with Russian crude, which turn into a mainstay for India’s refiners. Modi didn’t deal with Venezuelan oil purchases in his submit.
