In a significant move to bolster economic ties, the United States and India have reached a new trade agreement that slashes tariffs on Indian goods to 18%. The agreement, announced on Monday by US President Donald Trump, marks a considerable reduction from the previous reciprocal tariff of 25%. According to President Trump, the trade deal is effective immediately.
The agreement follows a conversation between President Trump and Indian Prime Minister Narendra Modi. Trump, in a post on his social media platform, described Modi as "one of my greatest friends and, a Powerful and Respected Leader of his Country". In addition to the tariff reductions, India has agreed to eliminate its tariffs and non-tariff barriers on American products. India has also agreed to cease purchasing Russian oil, opting instead for increased imports from the United States and potentially Venezuela.
Prime Minister Modi welcomed the tariff cut, acknowledging it as a boost for Indian industry and exporters. He expressed his gratitude to President Trump "on behalf of the 1.4 billion people of India for this wonderful announcement".
The tariff reduction is expected to provide immediate relief to Indian exporters, enhancing their competitiveness and improving order visibility. Several sectors are poised to benefit, including textiles, seafood, auto ancillaries, chemicals, and select consumer companies. The easing of trade tariffs is emerging as a meaningful positive for several export-oriented Indian sectors. Indian markets had been battered since the tariffs were levied by Washington, making it the worst-performing market among emerging nations in 2025, with record outflows of foreign investors.
India's Trade Minister Piyush Goyal stated the deal would draw the U.S. and Indian economies closer together and unlock unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers. He added that it will help India get technology from the U.S.
The US had first imposed a 25% tariff on Indian goods and later doubled it to 50% due to India's continued Russian oil imports.
The US Chamber of Commerce, while advocating a market-opening trade deal with India, called Mr. Trump's announcement progress towards that goal. However, a coalition of more than 800 small businesses called “We Pay the Tariffs” urged Americans not to celebrate the deal, which it called a “600 per cent tax increase on American businesses compared to 2024".
The deal 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 per cent of traded goods by value.