U.S. President Donald Trump on Monday unveiled a trade agreement with India that reduces U.S. tariffs on Indian imports to 18% from 50%, in return for New Delhi committing to stop purchasing Russian oil and easing trade restrictions.
Trump announced the agreement on social media following a conversation with Indian Prime Minister Narendra Modi, saying India would instead source oil from the United States and potentially Venezuela. A White House official told Reuters that Washington would scrap an additional 25% penalty tariff imposed over India’s purchases of Russian crude, which had been layered on top of a 25% reciprocal tariff. The announcement boosted U.S.-listed Indian stocks, with Infosys climbing 4.3%, Wipro rising 6.8%, HDFC Bank gaining 4.4%, and the iShares MSCI India ETF advancing 3%.
The news also lifted broader market sentiment, particularly in semiconductor and artificial intelligence stocks, pushing major indexes into positive territory.
Trump added that India pledged to significantly increase purchases of American goods, including more than $500b in U.S. energy products such as coal, alongside technology, agricultural goods, and other items. He also said India plans to cut tariffs and non-tariff barriers on U.S. products to zero.
Before Trump’s return to office and the implementation of higher U.S. tariff rates last year, India had some of the highest import duties globally, with a simple applied tariff rate of 15.6% and an effective rate of 8.2%, according to World Trade Organization data.
Limited details have been released about the agreement, including when the reduced tariff rates will take effect, the timeline for India to end Russian oil imports, the specifics of trade barrier reductions, and which U.S. products India will prioritise. As of late Monday, the White House had not issued the official presidential proclamation or Federal Register notice required to formalise the changes. Indian government ministries and Russia’s embassy in Washington did not immediately respond to requests for comment.
Unlike previous trade agreements with countries such as Japan and South Korea, the India deal did not include clear commitments to invest in U.S. industries.
Economist Madhavi Arora of Emkay Global said the agreement would broadly align India’s tariff levels with other Asian economies, typically ranging between 15% and 19%, and could remove a major drag on India’s exports and currency. Indian markets had suffered significant foreign investor outflows after Washington imposed the higher tariffs, making India one of the worst-performing emerging markets in 2025.
U.S. business groups responded cautiously. The U.S. Chamber of Commerce described the announcement as a positive step toward a broader market-opening trade agreement and said it was awaiting further details. Meanwhile, a coalition of more than 800 small businesses called “We Pay the Tariffs” criticised the move, arguing it represents a sharp rise in costs for American businesses compared with tariff levels of around 2% to 3% in 2024.
Modi welcomed the development, thanking Trump in a social media post and highlighting that Indian exports would benefit from the reduced 18% tariff rate. India’s Trade Minister Piyush Goyal said the deal would strengthen economic ties between the two nations and create new opportunities for Indian farmers, small businesses, entrepreneurs, and skilled workers, whilst facilitating greater access to U.S. technology.
The agreement follows India’s recent trade pact with the European Union, signed less than a week earlier, which is expected to reduce or eliminate tariffs on 96.6% of traded goods by value, although some EU agricultural products were excluded.
The Trump administration is working to finalise trade frameworks with major partners ahead of a U.S. Supreme Court decision on whether to overturn Trump’s reciprocal tariffs under emergency economic powers legislation. Officials recently secured a deal with Taiwan and indicated further agreements could follow regardless of the court’s ruling.
Trump had earlier suggested India might begin purchasing Venezuelan oil following a U.S. military operation that captured Venezuelan President Nicolas Maduro in early January. Increased imports from Venezuela could help offset India’s reduced reliance on Russian crude. India, the world’s third-largest oil importer, depends on imports for roughly 90% of its oil needs and has benefited from discounted Russian crude since Western sanctions were imposed after Moscow’s 2022 invasion of Ukraine.
However, India has already started scaling back Russian oil purchases. Imports stood at about 1.2 million barrels per day in January and are expected to decline to roughly 1 million barrels per day in February and 800,000 barrels per day in March, according to Reuters estimates.
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