US slashes tariffs on Indian goods to 18% as New Delhi agrees to halt Russian oil imports

US President Donald Trump announced a landmark trade agreement with India on Monday, marking a significant shift in bilateral relations. Under the deal, the US will slash tariffs on Indian-origin goods from 50% to 18% in exchange for New Delhi halting its purchases of Russian oil and reducing long-standing trade barriers.

Trump unveiled the agreement via social media following a telephone conversation with Indian Prime Minister Narendra Modi. He further noted that India will transition its oil procurement to the US and potentially Venezuela.

A White House official told Reuters that the US has withdrawn a punitive 25% supplemental tax previously imposed on all Indian imports due to the country’s continued purchase of Russian crude. This levy had been applied on top of an existing 25% “reciprocal” tariff.

Following the announcement, shares of major Indian companies traded in the US surged. IT consultancy firm Infosys closed the day up 4.3%, while Wipro climbed 6.8%. HDFC Bank gained 4.4%, and the iShares MSCI India exchange-traded fund rose 3%.

The positive momentum from Trump’s announcement, combined with optimistic sentiment surrounding semiconductor manufacturers and artificial intelligence, helped propel major indices into positive territory during the trading session.

Trump also stated that Modi committed India to “BUY AMERICAN at a much higher level.” He added that India has pledged to purchase more than $500 billion in energy from the US, including coal, alongside commitments to acquire technology, agricultural products, and other goods.

“They will also reduce the tariffs and non-tariff barriers they apply against the US to ZERO,” Trump said of India’s commitments.

According to World Trade Organization (WTO) data, India maintained some of the highest tariffs globally before Trump returned to office and raised US tariff rates to double digits last year. India’s simple applied rate stood at 15.6%, while the effectively applied tariff rate was 8.2%.

Trump’s Truth Social post lacked critical specifics, such as the effective date for the reduced tariffs, the deadline for India to terminate Russian oil imports, the specific scope of the trade barrier reductions, and the exact list of US products India has committed to purchasing.

By late Monday, the White House had not yet issued the executive order or Federal Register notice required to formalize these changes.

While a White House spokesperson declined to provide additional details, India’s ministries of trade and foreign affairs did not immediately respond to inquiries sent after business hours. The Russian Embassy in Washington also did not immediately return requests for comment.

Previous agreements with other major Asian trading partners, such as Japan and South Korea, included specific investment commitments in US industries totaling hundreds of billions of dollars. However, the announcement regarding India made no mention of specific investment pledges.

Madhavi Arora, an economist at Emkay Global, noted that the deal generally brings India “in line with its Asian peers regarding tariff rates,” which range between 15% and 19%. She added that the agreement would likely alleviate the disproportionate pressure on Indian exports and the rupee.

Indian markets have been hit hard since Washington first implemented the heightened tariffs, becoming the worst-performing emerging market in 2025. This period saw record levels of foreign capital outflows.

US business groups responded to the announcement with a mix of caution and criticism. The US Chamber of Commerce, which has long advocated for a market-opening trade deal with India, characterized Trump’s statement as progress toward that goal.

“We are optimistic that this is the first step toward a more comprehensive trade agreement,” Chamber President Suzanne Clark said in a statement. “This deal will open doors to further increase private sector cooperation, and we look forward to reviewing the details.”

Conversely, “We Pay the Tariffs,” a coalition representing more than 800 small businesses, urged Americans not to celebrate the deal. The group described the agreement as a “600% tax increase for American businesses compared to 2024.” The coalition pointed out that US tariffs on Indian imports were approximately 2% to 3% at that time, whereas they will now stand at 18%, with the potential to rise further if India does not fully decouple from Russian oil.

Modi expressed his enthusiasm on X, stating, “It was great to speak with my dear friend President Trump today. I am pleased that ‘Made in India’ products will now face a tariff reduced to 18%.” He added, “A big thank you to President Trump on behalf of the 1.4 billion people of India for this great announcement.”

Indian Commerce Minister Piyush Goyal stated that the agreement would bring the US and Indian economies closer together.

“This agreement creates unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers, in line with the vision to Make in India for the world, Design in India for the world, and Innovate in India for the world,” Goyal posted on X. “It will also assist India in acquiring technology from the US.”

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

The Trump administration is moving quickly to finalize framework agreements with major trading partners ahead of a pending US Supreme Court decision on whether to overturn the “reciprocal” tariffs Trump implemented under the International Emergency Economic Powers Act.

Administration officials said last month that they reached an agreement with Taiwan and expect such deals to continue regardless of the court’s ruling. Officials claim that even if the court issues an annulment, the tariffs would be reimposed under alternative legal authorities.

On Saturday, Trump hinted at a potential deal for India to purchase Venezuelan oil following a US military raid in early January that resulted in the abduction of Venezuelan President Nicolas Maduro.

This trade breakthrough follows months of tense negotiations between the world’s two largest democracies.

Last August, Trump increased taxes on Indian imports to 50% in an effort to force New Delhi to abandon Russian oil. Earlier this month, he warned that the rate could increase again if India failed to curb its purchases.

Venezuelan oil acquisitions could help India, the world’s third-largest oil importer, substitute a portion of the crude it currently sources from Russia.

India is heavily dependent on energy imports, sourcing approximately 90% of its needs from abroad. Following the 2022 Russian invasion of Ukraine and subsequent Western sanctions on Russian energy, discounted Russian crude helped India lower its import costs.

However, India has recently begun to slow its Russian oil intake. Purchases in January stood at approximately 1.2 million barrels per day (bpd); this is expected to drop to approximately 1 million bpd in February and 800,000 bpd in March.