Trump, Modi Seal Trade Deal: Tariff Reduced To 18%, Says US President

US President Donald Trump on Monday announced after a phone call with Indian Prime Minister Narendra Modi that the United States and India have agreed on a new trade deal, reducing reciprocal tariffs from 25 % to 18 %. Trump said in a post on Truth Social that he and Modi discussed trade, energy, and the war in Ukraine, and that India has agreed to stop buying Russian oil and instead increase purchases of oil from the United States and potentially Venezuela. Trump claimed this shift could help “end the war in Ukraine,” which is an exaggeration as India for some time had substantially reduced lifting of Russian oil.

India’s Prime Minister Narendra Modi has just confirmed Trump’s announcement, and posted on X. "Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement.’’ He went on to say: "When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation. President Trump’s leadership is vital for global peace, stability, and prosperity. India fully supports his efforts for peace. I look forward to working closely with him to take our partnership to unprecedented heights.’’

The fine print of the agreement is not known. Has India opened up its core agricultural sector- wheat, rice as well as its diary to US imports? These details are not known at the time of writing. Oil was never a major issue, though President Trump and his senior ministers had drummed it up as a major factor to put pressure on India.

Moscow was never a major supplier of oil, but with Russia offering discounted oil following wide-ranging sanctions slapped by the Biden administration since the Ukraine war, India began lifting nearly 40 per cent of Russian oil. As pointed out earlier India has all but stopped buying Russia oil, and prepared the grounds for the trade deal.

From the warm social media messages shared by both leaders, India-US relations seem to be back on track. Trump has announced that India will "move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO. The Prime Minister also committed to “BUY AMERICAN,” at a much higher level, in addition to over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products.’’

A US embassy spokesman has confirmed that 25 percent tariff on Russian oil has been dropped.

What geo-political implications will this deal have? Will this mean India’s pivot to the Western camp? India had long been playing footsie with both sides. Does this mean a total break from India’s traditional close alliance with Russia? Can India’s diplomatic and defence ties remain untouched, as there will be pressure to buy more and more American defence hardware? It is too early to judge. India has since independence valued its strategic autonomy, balancing ties with major powers US, Russia and China rather than aligning fully with any single bloc.

Going by the messaging, a new chapter of cooperation between India and the US has begun. Reducing tariffs and boosting purchases of US oil and goods would strengthen economic integration with the United States. For the US, this supports Trump’s broader strategy to use trade policy as leverage in geopolitics.

"Our amazing relationship with India will be even stronger going forward. Prime Minister Modi and I are two people that GET THINGS DONE, something that cannot be said for most," Trump wrote.

India’s foreign minister Subrahmanyam Jaishankar is already in Washington and will be meeting with Secretary of State Marco Rubio and other top US officials in the next two days.

What is the price India will have to pay will pan out in time.