WASHINGTON/NEW DELHI — In a significant breakthrough following months of tense negotiations, the United States and India announced a sweeping trade agreement Monday that dramatically reduces American tariffs on Indian goods in exchange for India ending its purchases of Russian oil.
President Donald Trump revealed the deal on social media after speaking with Indian Prime Minister Narendra Modi, announcing that U.S. tariffs on Indian imports would drop to 18% from a previous high of 50%. The agreement requires India to halt its Russian oil purchases and commit to buying American energy products instead.
Deal Details and Market Impact
A White House official confirmed that the U.S. is rescinding a punitive 25% duty that had been imposed on all Indian imports over the country's Russian oil purchases. That penalty had been layered on top of a 25% "reciprocal" tariff, creating the 50% combined rate.
Financial markets responded enthusiastically to the news. U.S.-listed shares of major Indian companies surged, with IT consulting giant Infosys climbing 4.3%, Wipro rising 6.8%, and HDFC Bank gaining 4.4%. The iShares MSCI India exchange-traded fund rallied 3%.
According to Trump's announcement, India has committed to purchasing more than $500 billion in U.S. energy products, including oil and coal, as well as technology, agricultural products, and other American goods. Modi also pledged that India would "BUY AMERICAN at a much higher level."
The president added that India would work to reduce its tariffs and non-tariff barriers against the United States "to ZERO."
Energy Implications
The agreement marks a major shift in India's energy purchasing strategy. As the world's third-largest oil importer, India has relied heavily on discounted Russian crude since Moscow's 2022 invasion of Ukraine prompted Western sanctions on Russian energy exports. India covers approximately 90% of its oil needs through imports, and access to cheaper Russian supplies has helped contain import costs.
Recent data indicates India had already begun reducing its Russian oil purchases, with imports declining from around 1.2 million barrels per day in January to projected levels of 1 million barrels per day in February and 800,000 barrels per day in March.
Trump suggested that India could purchase Venezuelan oil as a replacement source, following the U.S. seizure of Venezuelan President Nicolas Maduro in a military operation earlier this year.
Mixed Reactions
Prime Minister Modi expressed gratitude for the agreement in a social media post: "Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India."
Indian Trade Minister Piyush Goyal characterized the deal as opening "unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers."
However, U.S. business groups offered more measured responses. While the U.S. Chamber of Commerce called the announcement "progress" toward a comprehensive trade agreement, a coalition of more than 800 small businesses criticized what they termed a "600% tax increase on American businesses compared to 2024," noting that tariffs on Indian imports had previously been just 2% to 3%.
Broader Context
The agreement brings India's tariff rate "broadly in line with its Asian peers" at 15% to 19%, according to Madhavi Arora, an economist at Emkay Global. Indian markets had suffered significant losses since the higher U.S. tariffs were imposed, making India the worst-performing emerging market in 2025 with record foreign investor outflows.
The deal comes less than a week after India finalized a separate trade agreement with the European Union covering 96.6% of traded goods by value.
As of Monday evening, the White House had not issued formal documentation to make the tariff changes official, and key details remained unclear, including implementation dates and specific timelines for India to completely end Russian oil purchases.
The Trump administration has been moving quickly to secure trade agreements with major partners ahead of an anticipated U.S. Supreme Court ruling on the legality of the president's "reciprocal" tariffs under the International Emergency Economic Powers Act.
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