US Cuts Tariffs on Indian Goods as India Agrees to Stop Buying Russian Oil

Post by : Saif Nasser

The United States and India have reached a major trade agreement that lowers U.S. tariffs on Indian goods while reshaping India’s energy imports. Under the deal, the United States will reduce tariffs on Indian products to 18%, down from a steep 50%, while India has agreed to stop buying oil from Russia.

U.S. President Donald Trump announced the agreement after a phone call with Indian Prime Minister Narendra Modi. He said the decision would strengthen trade ties between the world’s two largest democracies and bring India closer to U.S. trade partners in Asia.

A U.S. official said Washington would remove a special 25% punitive tariff that had been imposed on India because of its purchases of Russian oil. This penalty was added on top of an existing 25% tariff, pushing total duties to very high levels. With the new deal, the tariff rate will fall to 18%, making Indian exports more competitive in the U.S. market.

In return, India has agreed to stop buying Russian oil and instead purchase energy from the United States and possibly Venezuela. India is one of the world’s largest oil importers and depends on foreign supplies for about 90% of its needs. In recent years, it bought large amounts of cheaper Russian oil, which helped keep costs down after global energy prices rose.

President Trump also said India would sharply increase purchases of U.S. goods. These include energy products worth more than $500 billion, along with technology, farm goods, and other items. He added that India would work to reduce both tariff and non-tariff trade barriers against the United States.

Prime Minister Modi welcomed the announcement and thanked President Trump publicly. He said Indian-made products would now face a much lower tariff in the U.S. market, calling it a positive step for India’s 1.4 billion people. India’s trade minister said the deal would create new opportunities for farmers, small businesses, entrepreneurs, and skilled workers.

Financial markets reacted quickly. Shares of major Indian companies listed in the United States rose sharply, and Indian-focused investment funds also gained. The news helped lift investor confidence after months of pressure caused by high tariffs and foreign investment outflows.

However, many details of the agreement remain unclear. The U.S. government has not yet announced when the new tariff rate will take effect or how quickly India must stop buying Russian oil. There has also been no official document released to make the changes legally binding.

Some U.S. business groups responded with caution. While large trade organizations welcomed the progress, a group representing small businesses warned that an 18% tariff is still far higher than the 2% to 3% rates seen in 2024. They said American companies could still face higher costs if the agreement is not fully carried out.

The deal comes shortly after India signed a major trade agreement with the European Union, showing New Delhi’s push to expand global trade ties. It also reflects Washington’s efforts to finalize trade frameworks with key partners amid legal uncertainty over U.S. tariff powers.

Overall, the agreement marks a significant shift in U.S.-India trade and energy relations. If fully implemented, it could boost exports, reshape oil markets, and bring the two economies closer together at a time of major global change.