New Delhi : In a major diplomatic breakthrough, the United States and India announced a landmark trade agreement on Monday, with President Donald Trump slashing reciprocal tariffs on Indian goods from 50% to 18%, contingent on Prime Minister Narendra Modi's commitment to halt purchases of Russian oil.
The announcement sent Indian markets soaring on Tuesday, with benchmark indices Sensex and Nifty rallying nearly 3% during afternoon trading. Textile, leather, gems and jewellery, seafood, and specialty chemicals stocks led the surge, with some companies seeing gains of up to 20%.
Key Terms of the Deal
Under the agreement reached during a phone conversation between Trump and Modi, Washington will reduce the reciprocal tariff rate from the current 25% base rate—plus an additional 25% penalty for purchasing Russian oil—down to a flat 18%. Since August 2025, Indian exporters had been facing steep 50% tariffs in the American market.
"Delighted that Made in India products will now have a reduced tariff of 18%," Modi said, thanking Trump. "When two large economies and the world's largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation."
Trump claimed that Modi "agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela." However, Kremlin spokesman Dmitry Peskov said Tuesday that Russia has not received any official communication from India about stopping oil purchases.
Market and Industry Response
The Indian rupee rallied sharply following the announcement, while government bond yields eased to approximately 6.71% from 6.77%, reflecting renewed investor confidence.
Industry leaders welcomed the development enthusiastically. Bharti Enterprises Chairman Sunil Bharti Mittal called it "a much-awaited and significant milestone" that unlocks "immense opportunities for investments and growth." Mahindra Group CEO Anish Shah termed it "a significant step forward in strengthening bilateral trade and investment ties."
The Gem & Jewellery Export Promotion Council (GJEPC) hailed the agreement as providing "vital relief" for a sector that had faced severe pressure from escalating tariffs. Chairman Kirit Bhansali noted the deal "lowers costs for U.S. importers and provides immense relief to diamond jewellery manufacturers."
Political Reactions Mixed
While the ruling NDA coalition congratulated Modi at a parliamentary party meeting, opposition parties demanded greater transparency. Congress leader Rahul Gandhi accused the Prime Minister of being "compromised" and claimed Modi had "sold out the hard work of Indian farmers."
Congress general secretary Jairam Ramesh said Modi has "completely surrendered" and demanded that the government present the full text of the agreement to Parliament for debate. Congress MP K.C. Venugopal submitted an adjournment motion in the Lok Sabha to discuss the deal.
Samajwadi Party president Akhilesh Yadav criticized the opening of Indian markets to American agricultural produce as a "betrayal" of the country's farming population.
However, several state leaders praised the agreement. Haryana Chief Minister Nayab Singh Saini called it a "historic leap," while Jammu and Kashmir Chief Minister Omar Abdullah welcomed the tariff reduction as bringing "relief to many exporters."
Sector-Specific Impact
Economic Affairs Secretary Anuradha Thakur said the agreement has "reduced a great deal of global uncertainty," while Revenue Secretary Arvind Shrivastava noted it would "create more opportunities for our labour-intensive and manufacturing sectors in the U.S. market."
The Aluminium Extrusion Manufacturers' Association (ALEMAI), however, cautioned that aluminium, iron, and steel product exports would continue facing higher 50% duties under separate Section 232 rulings.
Commerce and Industry Minister Piyush Goyal was expected to make a statement in Parliament on Tuesday regarding the agreement's details.
The deal marks a significant shift in India-U.S. trade relations and comes amid Trump's broader strategy of imposing "reciprocal tariffs" on trading partners worldwide.
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