U.S. President Donald Trump on Monday announced a trade agreement with India that cuts U.S. tariffs on Indian goods to 18% from 50%, in exchange for New Delhi halting purchases of Russian oil and lowering trade barriers.
Trump said the agreement includes higher Indian purchases of U.S. energy, coal, technology and agricultural products, and represents the first phase of a broader trade pact to be negotiated at a later stage.
Below are the key details so far:
India will increase purchases of U.S. petroleum, defence equipment, electronics, pharmaceuticals, telecommunications products and aircraft. Limited market access will also be offered for certain agricultural goods. The purchasing commitments will be spread over several years.
While Trump said India would eventually reduce tariffs to zero, it remains unclear which products will qualify for zero duties or phased reductions, similar to provisions in India’s trade agreements with the European Union and the United Kingdom.
In 2024, the United States recorded a $1.3 billion agricultural trade deficit with India.
Indian exporters said the reduction in U.S. tariffs to 18% would provide a significant boost to shipments of textiles and apparel, pharmaceuticals, chemicals, footwear, jewellery and food products such as shrimp. The move places India broadly on par with Asian competitors including Vietnam and Bangladesh.
Indian refiners have already begun cutting Russian oil imports and diversifying supplies toward the United States, the Middle East, Africa and South America. However, industry sources said refiners will require a wind-down period to exit existing Russian contracts, and the government has not yet ordered a complete halt to purchases.
After Washington raised tariffs in late August, sectors such as textiles, jewellery and shrimp exports were hit, though exporters used discounts to retain U.S. buyers.
Despite the tariffs, India’s exports to the United States rose 15.9% year on year to $85.5 billion in the January–November period, while imports reached $46.1 billion, according to government data.
Total two-way trade in goods and services amounted to $212.3 billion in 2024, including a $45.8 billion U.S. goods trade deficit and a small services trade surplus, U.S. government estimates show.
Analysts said that while reciprocal tariffs may be reduced under the new framework, U.S. Section 232 duties on steel, aluminium, copper, automobiles, auto parts and certain other goods are likely to remain in place.
Exports of Indian engineering goods to the United States rose about 5% year on year to $14.68 billion in the first nine months of the 2025/26 fiscal year, according to industry estimates. As a result, a portion of India’s exports is expected to continue facing higher tariffs despite the deal.
The announcement boosted investor confidence. The rupee strengthened more than 1% against the U.S. dollar on Tuesday, the benchmark Nifty 50 index rose about 3% after climbing as much as 5% earlier in the session, and the 10-year government bond yield fell by around five basis points.
Analysts said the agreement could support exports, capital inflows and the rupee, although a full halt to Russian oil purchases is likely to take time to implement.