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 per cent, down from 50 per cent, including the removal of a 25 per cent penalty previously linked 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. According to President Trump, the revised tariff structure forms part of a broader effort to reshape trade and energy ties between the two countries.

Reacting to the announcement, Arun Karna, Managing Director and Chief Executive Officer at AT&T Global Network Services India, described the agreement as “a defining moment in the evolution of one of the world’s most consequential economic partnerships”. He said the arrangement goes beyond tariff reductions and market access, signalling deeper strategic alignment based on trust, shared democratic values, and cooperation in areas such as resilient supply chains, advanced manufacturing, digital trade, clean energy, and emerging technologies including artificial intelligence and semiconductors.

“This agreement creates clarity, confidence, and expanded opportunity for businesses on both sides,” Karna said. “It sends a powerful message that open markets, collaboration, and technology-driven growth remain the strongest engines of shared prosperity.”

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 further stated that India had agreed to reduce 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. Although 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”.

Karna noted that for India, the agreement strengthens integration with global value chains and accelerates innovation-led growth, while for the US, it deepens engagement with one of the fastest-growing, technology-driven economies. He described the development as “a win for India, a win for the US, and a win for the global economy”.

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, which were adversely affected by the Trump-era tariffs introduced in 2025. The agreement aims to restore competitiveness and expand Indian access to the US market.

Jaijit Bhattacharya, President of the Centre for Digital Economy Policy Research (C-DEP), said the revised tariff framework 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 such as 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. As a result, products including automobiles, steel, aluminium, timber, copper, trucks, and ships will continue to face elevated duties.

An estimated USD 8 billion worth of Indian exports, nearly 10 per cent of India’s total shipments 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 per cent rate, India remains well placed relative to key manufacturing peers and retains its attractiveness as a global manufacturing and export hub,” he said.

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

“The 18 per cent rate puts India at an advantage over other low-cost economies. But in electronics, the implications of the Build America, Buy America 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 linked to India’s energy dealings with Russia. Indian exports to the US declined sharply as a result.

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

Together, these developments reflect India’s broader strategy to diversify trade partnerships and reduce dependencies amid evolving geopolitical tensions.

Analysts caution that while the tariff cut represents a notable shift, the long-term impact will depend on detailed implementation, regulatory alignment, and the fine print of trade terms. Further negotiations will be crucial in determining whether the agreement translates into wider and more sustainable market access for both countries.

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.

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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