Trump announces tariff rollback as India, US reset trade ties

The United States and India have reached a new trade agreement that will reduce US tariffs on Indian goods to 18%, down from 50%, including the removal of a 25% penalty previously tied to India’s oil imports from Russia.

The development was announced by US President Donald Trump on Monday following a phone call with Prime Minister Narendra Modi of India. According to President Trump, the revised tariff structure is part of a broader arrangement to reshape trade and energy ties between the two countries.

Reported Commitments and Trade Conditions

According to statements posted on Truth Social by President Trump, India has agreed to scale back its imports of Russian crude oil and increase purchases from the United States and, potentially, from Venezuela.

President Trump also claimed that Prime Minister Modi has committed to more than USD 500 billion in exports from America across sectors such as energy, technology, agriculture, and coal products. He also noted that Modi had committed to reducing Indian tariff and non-tariff barriers to “zero,” although the Indian government has not officially confirmed these details.

While the announcement has drawn widespread attention, neither government has released any official document outlining the full terms of the agreement. While Indian officials have acknowledged the development, formal details regarding timelines, implementation, and sector-specific commitments remain pending.

On social media platform X, Modi said he was “delighted” by the agreement and thanked President Trump “on behalf of the 1.4 billion people of India,” adding that the development “unlocks immense opportunities for mutually beneficial cooperation.”

Impact on Indian Exporters and Key Sectors

The revised India-US trade tariff structure is expected to benefit Indian exporters in labour-intensive sectors such as textiles, seafood, and gems and jewellery—industries that were adversely affected by the Trump tariffs in 2025. The agreement aims to restore competitiveness and increase Indian access to the US market.

Jaijit Bhattacharya, President of the Centre for Digital Economy Policy Research (C-DEP), said the revised tariff structure marks a significant turning point for India’s trade.

“India was able to craft swift reforms in the third quarter of last year and still grow exports despite losing around USD 40 billion in annual trade with the US due to increased tariffs—excluding sectors like pharmaceuticals, electronics, and barytes,” Bhattacharya said.

He added that reclaiming this market under the new tariff regime would give a strong boost to India’s export performance and help expand its footprint in the US.

However, some trade restrictions will persist under Section 232 of the US Trade Expansion Act, which allows tariffs on national security grounds. This means products such as automobiles, steel, aluminium, timber, copper, trucks, and ships will still face elevated duties.

An estimated USD 8 billion worth of Indian exports—nearly 10% of India’s total exports to the US—may remain affected by these provisions.

Electronics and Tech Seen as Growth Drivers

Pankaj Mohindroo, Chairman of the India Cellular and Electronics Association (ICEA), welcomed the move. “At the agreed 18% rate, India remains well placed relative to key manufacturing peers and retains its attractiveness as a global manufacturing and export hub,” he said.

Mohindroo said the development supports India’s strategy to scale manufacturing and deepen integration into US-led global value chains, particularly in electronics. He projected that bilateral electronics trade alone could reach USD 100 billion, contributing to the broader USD 500 billion ambition.

Bhattacharya noted, however, that the impact on electronics and digital infrastructure may be limited, as these sectors were not covered under the earlier punitive tariffs.

“The 18% rate puts India at an advantage over other low-cost economies. But in electronics, the implications of the Build America, Buy America (BABA) Act will still constrain market access,” he said.

Strategic Trade Backdrop and Diplomatic Context

The agreement follows a turbulent period in bilateral trade between Washington and New Delhi, marked by steep tariff hikes in 2025 due to India’s energy dealings with Russia. Indian exports to the US had dropped sharply as a result.

The new trade understanding also comes just days after India signed a landmark free trade agreement with the European Union, aimed at removing tariffs on most goods.

This broader diplomatic momentum signals India’s attempt to diversify trade relationships and reduce dependencies amid evolving geopolitical tensions.

Analysts caution that while the tariff cut is a notable shift, the real impact will depend on implementation, the fine print of trade terms, and whether further negotiations lead to wider market access for both nations.

The image accompanying this story was created using AI. The article was written and reviewed by the authors, with limited use of AI-based editing tools.

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