US to cut tariffs on Indian goods to 18% under new trade deal

In a post on Truth Social after a call with Narendra Modi, Trump said India would instead buy oil from the US and potentially Venezuela.

A White House official told Reuters the administration would remove a punitive 25% duty imposed on all Indian imports over India’s Russian oil purchases, which had been added on top of a 25% “reciprocal” tariff.

Markets rally, but details remain scarce.

US-listed Indian stocks rose on the news, with Infosys ending up 4.3%, Wipro gaining 6.8%, and HDFC Bank up 4.4%.

The iShares MSCI India ETF climbed 3%.

The announcement also supported broader sentiment around semiconductor and AI-linked shares, helping lift major indexes into positive territory.

Trump said Modi had pledged India would “BUY AMERICAN at a much higher level”, including purchases of more than $500 billion of US energy, such as coal, plus technology, agricultural goods and other products.

He added that India would move to cut tariffs and non-tariff barriers on the US to ZERO.

Before Trump returned to office and pushed US tariff rates into double-digit territory last year, India ranked among the world’s highest-tariff countries, with a simple applied rate of 15.6% and an effective applied tariff of 8.2%, according to World Trade Organisation data.

However, Trump’s message did not specify when the lower US tariff rate would take effect, the deadline for India to stop buying Russian oil, which barriers would be reduced, or which US products India had committed to purchase.

By late Monday afternoon, the White House had not issued a presidential proclamation or published a Federal Register notice required to formalise the changes.

A White House spokesperson declined to provide more details.

India’s commerce and foreign ministries did not immediately respond to requests sent after working hours, and Russia’s embassy in Washington also did not immediately respond to a request for comment.

Previous US trade deals with major Asian partners such as Japan and South Korea have included promises to invest hundreds of billions of dollars in US industries, but no specific investment commitments were mentioned in the India announcement.

The deal would bring India broadly into line with tariff levels faced by its Asian peers of 15% to 19%, said Madhavi Arora of Emkay Global.

She said it would remove an outsized drag on India’s exports and its rupee.

Indian markets have been under pressure since the US tariffs were imposed, making India the worst-performing emerging market in 2025, with record foreign investor outflows, the report said.

US business groups offered a mixed response.

The US Chamber of Commerce said Trump’s announcement was a movement towards its long-standing goal of a market-opening trade deal with India.

Chief executive Suzanne Clark said the group hoped the step would lead to a broader agreement and said it wanted to review the details.

A coalition of more than 800 small businesses, We Pay the Tariffs, urged Americans not to celebrate.

It described the deal as a “600% tax increase on American businesses compared to 2024”, noting US tariffs on Indian imports were around 2% to 3% at that time and would now be 18%, and could rise further if India did not fully move away from Russian oil.

Modi welcomes the announcement; EU pact adds momentum

Modi said on X he was pleased that “Made in India” products would face a reduced 18% tariff, and thanked Trump on behalf of India’s 1.4 billion people.

India’s trade minister Piyush Goyal said the arrangement would tighten ties between the two economies and open opportunities for farmers, MSMEs, entrepreneurs and skilled workers, while helping India access US technology.

The announcement comes less than a week after India signed a long-awaited trade deal with the European Union that is expected to eliminate or reduce tariffs on 96.6% of traded goods by value, though the pact excludes EU soybeans, beef, sugar, rice and dairy from tariff cuts.

The Trump administration has been seeking to finalise framework deals with major partners before the Supreme Court of the United States rules on whether to overturn Trump’s “reciprocal” tariffs under the International Emergency Economic Powers Act.

Officials said they reached a deal with Taiwan last month and expect agreements to continue regardless of the court’s decision, arguing they could reimpose tariffs using other authorities.

Trump hinted on Saturday at a possible arrangement for India to buy Venezuelan oil after the US seized Venezuelan President Nicolas Maduro in a military raid in early January.

The agreement follows months of fraught negotiations between the world’s two largest democracies.

Trump doubled duties on Indian imports to 50% last August to push New Delhi to stop buying Russian oil, and earlier this month said the rate could rise again if India did not curb purchases.

India, the world’s third-largest oil importer, relies on imports for around 90% of its needs.

It has used discounted Russian crude to cut costs since Moscow invaded Ukraine in 2022 and subsequent Western sanctions on Russia’s energy exports.

India has recently begun reducing purchases from Russia, the report said: imports were about 1.2 million barrels per day in January and are projected to fall to roughly 1 million bpd in February and 800,000 bpd in March, according to Reuters.