India, US agree to a trade deal; reciprocal tariff reduced to 18%: Trump

The announcement came after a phone call between Prime Minister Narendra Modi and Trump

US President Donald Trump on Monday announced his country’s much-awaited trade deal with India, reducing the reciprocal tariff on Indian goods to 18 per cent from 25 per cent. The announcement by Trump on Truth Social came after a phone call with Prime Minister Narendra Modi. Shortly after, Modi thanked Trump “on behalf of the 1.4 billion people of India for this wonderful announcement”.

 

The agreement came more than five months after Washington imposed 50 per cent tariffs on several Indian exports, including a 25 per cent punitive duty for India’s purchase of Russian crude oil.

 

Trump said New Delhi had agreed to stop buying Russian oil and buy much more from the US and, potentially, Venezuela, which would help end the war between Russia and Ukraine. He said India would

 

“likewise” move forward to reduce its tariffs and non-tariff barriers against the US to “ZERO”.

 

“It was an honour to speak with Prime Minister Modi, of India, this morning. He is one of my greatest friends, a powerful and respected leader of his country… He agreed to stop buying Russian oil, and to buy much more from the United States and, potentially, Venezuela…,” Trump said in his post. 

 

 “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%,” he further  said.

According to Trump, Modi has also committed to ‘buy American’ at a much higher level, in addition to over $500 billion of US energy, technology, agricultural, coal, and many other products.

 

“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. Thank you for your attention to this matter!” he said in the post.

 

In his post on X, Modi said: “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.”

 

The prime minister said 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,” he added.

 

India and the US have been working on two broad trade deal frameworks – an early harvest deal and a larger framework or Bilateral Trade Agreement (BTA), which will take longer time to materialise. The near-term focus is on the early harvest deal, which can address the reciprocal tariff is also taking shape.

 

India-US BTA negotiations were launched in March and have so far included half a dozen rounds of talks. The last recent informal discussions took place in New Delhi during the visit of a trade team headed by the deputy US Trade Representative (USTR) in December. Thereafter, the discussions were on a pause due to the year-end holiday season, amid the missed ‘Fall’ deadline and uncertainty regarding the finalisation of the deal. Thereafter, both sides were currently virtually engaged.

 

The India–US trade deal has gone through ups and downs like a roller coaster. While the devil is in the details, it removes a hanging sword over the rupee, equity and bond markets. Let us hope it is a win-win deal for both countries, as they have a lot to gain through cooperation, said Nilesh Shah, managing director, Kotak Mahindra AMC.

 

As of 11:20 pm IST, the GIFT Nifty index was up over 3 per cent.