US President Donald Trump announced on Monday that the United States and India have agreed to a landmark trade deal following a phone call with Prime Minister Narendra Modi.
The centerpiece: the American reciprocal tariff on Indian goods will drop from 25% to 18%, effective immediately.
Trump also claimed Modi pledged to stop buying Russian oil and commit to purchasing over $500 billion in US energy, technology, agricultural, and coal products.
In a series of posts on Truth Social, Trump described the agreement as a gesture of “friendship and respect” to Modi, whom he called “one of my greatest friends” and a leader with whom he “gets things done.”
The tariff reduction represents a significant easing of trade tensions that had escalated dramatically over the past year.
In August 2025, Trump had imposed a 50% reciprocal tariff on Indian exports in retaliation for New Delhi’s heavy purchases of Russian crude oil.
The move cost Indian exporters roughly $8 billion in potential revenue and triggered severe depreciation of the Indian rupee.
What the tariff reduction means for trade
The tariff cut to 18% addresses one-third of the punitive measures Trump imposed last year, though substantial duties remain.
A baseline “reciprocal tariff” is the percentage rate Trump applies to imports from a given country based on what he claims is the relative fairness of that nation’s tariff barriers.
An 18% rate is substantially lower than the 25% figure, but still higher than pre-dispute levels.
Industry analysts note the move signals renewed dialogue, though the negotiations were strained by India’s refusal to dismantle protections for its agricultural and dairy sectors.
The sectors are sensitive domestically, and PM Modi could not concede without facing political backlash.
Trump also stated that India will “reduce their Tariffs and Non-Tariff Barriers against the United States to ZERO,” language that suggests India has agreed to eliminate import duties and regulatory barriers on American goods.
If confirmed, this would represent a major opening of India’s markets, particularly for farm products, which have been off-limits in prior negotiations.
New Delhi has not officially confirmed this component.
The Russian oil claim and geopolitical stakes
Trump’s assertion that Modi agreed to “stop buying Russian oil” is the most contentious element and requires careful parsing.
The US administration has linked India’s Russian oil purchases to financing Moscow’s war in Ukraine, arguing they should cease.
However, India has resisted, citing energy security and dependence on discounted Russian supply.
In prior announcements, Trump has made similar claims about Modi agreeing to curtail Russian oil purchases; each time, India’s government has either denied or declined to publicly confirm.
Treasury Secretary Scott Bessent said in January 2026 that Indian refinery purchases of Russian crude had “collapsed” after the 25% tariff, but this appears to reflect tactical shifting rather than a permanent halt.
Trump also mentioned India pivoting to Venezuelan oil, a move he said Washington has now permitted.
India had paused Venezuelan purchases in 2024 after Trump imposed tariffs on countries buying Venezuelan crude.
That shift is now reversed, giving Indian refiners another option beyond Russia.
India’s Ministry of External Affairs has not issued an official statement.
External Affairs Minister S. Jaishankar is scheduled to visit Washington in early February for talks with US officials.
Until both capitals formally confirm the text and implementation timeline, investors and market analysts will treat Trump’s claims as aspirational statements pending verification.
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