US Reduces Tariffs on Indian Goods to 18% Amid Oil Purchase Agreement

US-India Trade Deal Overview

By Bhargav , Acharya and David Lawder

Impact on Indian Markets

WASHINGTON, Feb 2 (Reuters) - U.S. President Donald Trump on Monday said he had agreed on a trade deal with India that slashes U.S. tariffs on Indian goods to 18% from 50% in exchange for India lowering trade barriers, stopping its purchases of Russian oil and buying oil instead from the U.S. and potentially Venezuela.

Details of the Agreement

“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%,” Trump said in a social media post following a call with Indian Prime Minister Narendra Modi.

Future Oil Purchase Plans

A White House official told Reuters that the U.S. was rescinding a punitive, 25% duty on all imports from India over its purchases of Russian oil that had stacked on top of a 25% "reciprocal" tariff rate.

Modi also committed to buy more than $500 billion worth of U.S. energy, technology, agricultural and other products, Trump added.

   "Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%," Modi said in a social media post on X. "Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement."

U.S.-listed shares of major Indian companies rallied on the news. IT consulting firm Infosys was up 3.53% in afternoon trading, consultancy Wipro rose 7% , HDFC Bank gained 3.4% and the iShares MSCI India exchange-traded fund rallied 3.3%.

On Saturday, Trump teased a potential deal for India to buy Venezuelan oil after the U.S. seized Venezuelan President Nicolas Maduro in a military raid in early January.

The deal comes after months of tense trade negotiations between the world's two largest democracies.

Last August, Trump doubled duties on imports from India to 50% to pressure New Delhi to stop buying Russian oil, and earlier this month said the rate could rise again if it did not curb its purchases.

Purchases of Venezuelan oil would help replace some of the Russian oil bought by India, the world's third-biggest oil importer.

India relies heavily on oil imports, covering around 90% of its needs, and importing cheaper Russian oil has helped lower its import costs since Moscow invaded Ukraine in 2022 and western nations slapped sanctions on its energy exports.

Recently India has begun to slow its purchases from Russia. In January, they were around 1.2 million barrels per day, and are projected to decline to about 1 million bpd in February and 800,000 bpd in March, according to a Reuters report.

Indian markets have been battered since the tariffs were levied by Washington, , making it the worst-performing market among emerging nations in 2025, with record outflows of foreign investors.

(Reporting by Bhargav Acharya, David Lawder, Andrea Shalal and Ahmed Aftab; writing by Susan Heavey; Editing by Doina Chiacu, Michelle Nichols and David Gregorio)