US Slashes Tariffs on India to 18% in Exchange for Ending Russian Oil Purchases

NEW DELHI - In a significant shift in US-India trade relations, President Donald Trump announced Monday a bilateral agreement that reduces American tariffs on Indian goods to 18% from 50%, with India committing to halt Russian oil purchases and lower its own trade barriers.

The deal, revealed by Trump on social media following a phone call with Indian Prime Minister Narendra Modi, marks a dramatic de-escalation in what had been mounting trade tensions between the world's two largest democracies.

Key Terms of the Agreement

Under the arrangement, the United States will rescind a punitive 25% duty on Indian imports that had been imposed over India's purchases of Russian oil. This penalty had been stacked on top of a 25% "reciprocal" tariff, bringing the effective rate to 50%.

India has agreed to purchase over $500 billion worth of US energy products, including oil, coal, and potentially Venezuelan crude. The country also committed to significantly increase American technology, agricultural, and other product purchases—what Trump characterized as India agreeing to "BUY AMERICAN at a much higher level."

Additionally, Modi pledged to reduce India's tariffs and non-tariff barriers against US goods "to ZERO," according to Trump's announcement.

Market Reaction

US-listed Indian companies rallied sharply on the news. IT consulting giant Infosys closed 4.3% higher, while Wipro surged 6.8%. HDFC Bank gained 4.4%, and the iShares MSCI India exchange-traded fund jumped 3%.

The positive sentiment helped lift major US indexes into positive territory, adding to optimism around semiconductor and artificial intelligence sectors.

Details Still Emerging

As of late Monday, critical details remained unclear, including the effective date for the reduced tariff rates, the deadline for India to cease Russian oil imports, and specifics on which trade barriers India would eliminate.

The White House had not issued a presidential proclamation or Federal Register notice required to formalize the changes. India's commerce and foreign ministries did not immediately respond to requests for comment outside working hours.

Strategic Implications

The agreement addresses a longstanding point of Western concern: India's continued purchases of discounted Russian oil following Moscow's 2022 invasion of Ukraine. India, which imports roughly 90% of its oil needs, had been buying approximately 1.2 million barrels per day of Russian crude in January.

According to Reuters reporting, Indian purchases from Russia are projected to decline to about 1 million barrels per day in February and 800,000 barrels per day in March.

Madhavi Arora, economist at Emkay Global, noted the deal brings India "broadly in line with its Asian peers on tariff rates" of 15% to 19%, eliminating what had been a disproportionate burden on Indian exports.

Political Responses

Prime Minister Modi expressed gratitude on behalf of India's 1.4 billion citizens. "Wonderful to speak with my dear friend President Trump today," Modi wrote on social media platform X. "Delighted that Made in India products will now have a reduced tariff of 18%."

Indian Trade Minister Piyush Goyal said the agreement would "unlock unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers to Make in India for the world."

However, US business groups offered mixed reactions. While the US Chamber of Commerce called it progress toward a comprehensive trade agreement, a coalition of over 800 small businesses criticized what they termed a "600% tax increase on American businesses compared to 2024," when tariffs on Indian imports stood at just 2-3%.

Broader Context

The announcement comes less than a week after India signed a separate trade deal with the European Union expected to eliminate or reduce tariffs on 96.6% of traded goods by value.

The Trump administration has been racing to complete framework trade deals with major partners before the Supreme Court rules on the constitutionality of Trump's "reciprocal" tariffs under the International Emergency Economic Powers Act. A similar agreement was reached with Taiwan last month.

Indian markets had suffered significantly under the higher tariff regime, making India the worst-performing emerging market in 2025 amid record foreign investor outflows. The new agreement offers potential relief to an economy that had faced mounting pressure from Washington's trade policies.