After months of intense negotiations, the United States and India have finalized a trade agreement, marking a significant turning point in their relationship. The deal, announced on Monday, February 2, 2026, aims to de-escalate trade tensions and foster stronger economic cooperation between the two nations.

U.S. President Donald Trump revealed the agreement in a Truth Social post, stating that the U.S. would lower tariffs on goods imported from India from 25% to 18%. In return, India has agreed to reduce its tariffs on U.S. goods to "zero". Furthermore, the U.S. administration will eliminate the additional 25% tariff imposed in August 2025 in response to India's purchases of Russian oil.

Prime Minister Narendra Modi expressed his gratitude to President Trump in a post on X, acknowledging the potential benefits for both nations through collaborative efforts. While confirming the reduced tariff rate on Indian products, Modi did not directly address the topic of Russian oil or the elimination of tariffs on American goods.

The agreement follows a period of strained relations, with the U.S. previously imposing a 50% tariff on Indian goods. This new deal marks a significant improvement, offering Indian exporters enhanced access to the U.S. market. The reduction in tariffs is expected to boost the competitiveness of "Made in India" products, stimulating manufacturing growth, employment, and resilient supply chains.

India has also committed to purchasing more than $500 billion worth of American products, including energy, technology, agriculture, and coal. This commitment aims to reduce the trade deficit between the two countries and strengthen economic ties. The specific goods that India has agreed to purchase from the U.S. include petroleum, defense items, electronics, pharmaceuticals, telecom products, and aircraft. The trade deal also incorporates some agricultural products. The U.S. Secretary of Agriculture, Brooke Rollins, mentioned that the deal will enable the U.S. to export more farm products to India and reduce the U.S.’s agricultural trade deficit with India, which stood at $1.3 billion in 2024.

While this agreement signifies a step forward, negotiations for a more comprehensive deal covering additional sectors are expected to continue. The current agreement has been met with mixed reactions, with some critics suggesting that it undermines India's sovereignty by allowing the U.S. to dictate India's trade and oil partners. Others view it as a positive step that will boost Indian exports, stocks, and the rupee.

Overall, the India-U.S. trade deal represents a significant development in the economic relationship between the two countries. While challenges and criticisms remain, the agreement has the potential to unlock immense opportunities and foster mutually beneficial cooperation.