US and India Agree on Trade Deal Cutting Tariffs from 50% to 18%

President Donald Trump and Prime Minister Narendra Modi agreed on a trade deal Monday after months of tense talks. The US will lower tariffs on Indian goods from 50% to 18%, and India will stop buying Russian oil while committing to purchase over $500 billion in US energy, technology, farm products, and more.

Background

Talks between the US and India started early last year but hit a wall in August. That month, Trump put a 50% tariff on Indian goods. Half of that was a standard reciprocal rate, and the other half was a penalty. The penalty came because India kept buying Russian crude oil even after the Ukraine war began. Those high tariffs hurt trade between the two countries and added strain to their ties.

Trump has pushed hard on trade issues since taking office. He often points out what he sees as unfair deals with other nations. India faced one of the highest tariff rates from the US, higher than neighbors like Pakistan and China. Indian officials pushed back quietly while talks went on behind the scenes.

Modi and Trump spoke by phone in December. They talked about progress in their relations and shared views on world events. That call set the stage for this week's breakthrough. Trump has also claimed credit for helping end a border clash between India and Pakistan last year. Indian leaders have denied that, but it added heat to the negotiations.

India signed a separate deal with the European Union just days ago. That one opens up more European market access for Indian products like cars and drinks. In return, India got breaks on drug imports and more room in EU services. US Trade Representative Jamieson Greer said publicly that India came out ahead in that EU deal.

Markets in India reacted fast to the US news. The Nifty 50 index jumped 5% on Monday. The rupee got stronger against the dollar. Stocks in export-heavy sectors and companies like Reliance led the gains.

Key Details

The deal cuts the US tariff rate on India to 18%. That is down from the 25% reciprocal base plus 25% penalty, making a total of 50% before. Trump announced it on social media after his call with Modi. He said the move came out of friendship and respect for Modi.

"Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25% to 18%."

— President Donald Trump, social media post

India agrees to end purchases of Russian oil. Trump said India will buy more oil from the US and maybe Venezuela. On top of that, India pledged to buy $500 billion worth of US goods over time. That includes energy, tech, farm products, and others.

Energy and Oil Shift

India has been one of the biggest buyers of Russian oil since the Ukraine war. That drew penalties from the US. Now, the deal pushes India to switch suppliers. Trade experts call this a smart move for the US. It cuts Russia's oil revenue and opens doors for American exports. Trump hinted at this over the weekend, telling reporters India would buy Venezuelan oil as part of a bigger plan.

India's Commerce Minister Piyush Goyal said talks are now moving toward full closure. He noted no big sticking points remain.

"We can now look at moving towards closure."

— Piyush Goyal, India's Commerce Minister

The 18% rate beats the 19% Pakistan got in its own deal with Trump. It puts India in a stronger spot than some rivals.

What This Means

Lower tariffs mean Indian exporters pay less to sell in the US. That could boost shipments of textiles, drugs, gems, and auto parts. US companies gain better access to India's huge market, now over $4 trillion in size and headed to $30 trillion by 2047, as Goyal put it. Farm goods from America could flow in more freely.

The oil shift hits Russia hard. India was a top customer for discounted Russian crude. US exports of oil, gas, and coal stand to grow. Tech and farm sectors in both countries see new chances.

Trade ties were a sore spot that spilled into other areas like defense and security. This deal eases that pressure. Experts say it shows two big democracies can sort out differences amid tough global politics.

India's recent EU deal adds to the wins. It gives zero-duty access for billions in labor-heavy exports right away. That strengthens India's hand in world trade.

For US workers, more Indian buys mean jobs in energy and farming. Washington's state, with its ports and farms, could see direct gains from higher exports.

Talks may lead to a full free trade agreement later. Details will come in joint statements and binding papers soon. Tariffs won't drop until those steps happen. Both sides call this a positive step forward.

The deal fits Trump's push for fair trade. It rewards nations that align with US goals on energy and markets. For India, it removes a big trade barrier at a key time.