Delhi [India], February 3 (HBTV): After prolonged negotiations, India and the United States have agreed to a trade deal under which American reciprocal tariffs on Indian goods will be reduced to 18 percent, while New Delhi will expand imports from the US across multiple sectors.
A week after India and the European Union concluded what was described as the ‘mother of all trade deals’, New Delhi has another major reason to cheer. On Monday, US President Donald Trump announced that he and Prime Minister Narendra Modi had agreed on a landmark trade agreement between India and the United States.
In a social media post following a phone call with Prime Minister Modi, Trump said the United States would lower its reciprocal tariff on Indian goods from 25 per cent to 18 per cent with immediate effect. He said the decision was taken ‘out of friendship and respect for Prime Minister Modi’ and at India’s request.
Many observers believe that if the India–EU trade pact was the ‘mother of trade deals’, then the India–US agreement could be termed the ‘father of all trade deals’. The development also marks a significant shift in US–India relations, which had reached a low point last year.
While no formal agreement has been signed yet, Trump said the two sides had reached an understanding under which American tariffs on Indian goods would be reduced, while India would eliminate tariffs and non-tariff barriers on US products. The announcement followed a phone conversation between the two leaders, with US Ambassador to India Sergio Gor confirming on X that the discussion had taken place and urging followers to ‘stay tuned’.
According to Trump, the US will also rescind a punitive 25 per cent duty imposed on Indian imports over New Delhi’s purchases of Russian oil, which had been stacked on top of the existing reciprocal tariff. India’s country-specific tariff rate, he said, would be lowered to 18 per cent.
India has also committed to reducing tariffs and non-tariff barriers against the United States. In trade terms, this signals an in-principle commitment to reduce or phase out duties on selected US products rather than an immediate elimination of all import duties. Non-tariff barriers include measures such as licensing requirements, quotas, certification rules, local sourcing norms, and regulatory approvals that can restrict market access.
Trump further announced that India would purchase more than $500 billion worth of US energy, technology, agricultural products, coal, and other goods as part of the agreement. He also said India had agreed to stop buying Russian oil and would instead increase purchases from the United States and potentially Venezuela.
In his post, Trump linked the development to broader geopolitical goals, writing that the move would help end the war in Ukraine, which he said was claiming thousands of lives each week.
With the new tariff structure, India is expected to gain a competitive edge in exports compared to other Asian economies. India’s 18 per cent tariff rate is lower than the 37 per cent imposed on China, 20 per cent on Bangladesh, and 19 per cent on Pakistan.
(Inputs from FirstPost)