US to Cut Tariffs on India to 18%, India Agrees to End Russian Oil Purchases

US Reduces Tariffs on Indian Goods to 18% as India Halts Russian Oil Imports

Overview of the US-India Trade Agreement

By David Lawder and Aftab Ahmed

Details of Tariff Reductions

WASHINGTON/NEW DELHI, Feb 2 (Reuters) - U.S. President Donald Trump on Monday announced a trade deal with India that slashes U.S. tariffs on Indian goods to 18% from 50% in exchange for India halting Russian oil purchases and lowering trade barriers.

Impact on Oil Imports

Trump announced the deal on social media following a call with Indian Prime Minister Narendra Modi, noting that India would now buy oil from the U.S. and potentially Venezuela.

Reactions from Business Groups

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.

Future Trade Prospects

U.S.-listed shares of major Indian companies rallied on the news. IT consulting firm Infosys closed 4.3% higher, consultancy Wipro rose 6.8%, HDFC Bank gained 4.4% and the iShares MSCI India exchange-traded fund rallied 3%.

Trump's announcement added to positive sentiment over semiconductor makers and artificial intelligence, lifting major indexes into positive territory on the day.

Modi also committed India to "BUY AMERICAN at a much higher level," in addition to buying more than $500 billion worth of U.S. energy, including coal, along with technology, agricultural and other products, Trump added.

"They will likewise move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO," Trump said of India.

Until Trump returned to office and raised U.S. tariff rates to double-digit levels last year, India had some of the world's highest tariffs, with a simple applied rate of 15.6% and an effective applied tariff of 8.2%, according to World Trade Organization data.

FEW DETAILS AVAILABLE

Trump's Truth Social message provided few details, including on the start date for the lower tariff rates, the deadline for India to end Russian oil purchases, trade barrier reductions and which U.S. products India had committed to purchasing.

As of late Monday afternoon, the White House had not issued a presidential proclamation nor a Federal Register notice required to make the changes official.

A White House spokesperson offered no further details, while India's commerce and foreign ministries did not immediately respond to requests sent after working hours. Russia's embassy in Washington also did not immediately respond to a request for comment.

Previous trade deals with other major Asian trading partners including Japan and South Korea have included commitments to invest hundreds of billions of dollars into U.S. industries, but the India announcement did not mention any specific investments.

The deal brings India "broadly in line with its Asian peers on tariff rates" of 15% to 19%, said Madhavi Arora, economist at Emkay Global, adding that it would eliminate a disproportionate drag on India's exports and its rupee currency.

Indian markets had 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.

U.S. business groups reacted with caution and criticism. The U.S. Chamber of Commerce, which has long advocated a market-opening trade deal with India, called Trump's announcement progress towards that goal.

"We are optimistic that this is the first step toward a comprehensive trade agreement that will unlock even more private sector collaboration, and we look forward to reviewing the details of the deal," Chamber CEO Suzanne Clark said in a statement.

A coalition of more than 800 small businesses called "We Pay the Tariffs" urged Americans not to celebrate the deal, which it called a "600% tax increase on American businesses compared to 2024." The group noted that U.S. tariffs on Indian imports were about 2% to 3% at that time but would now be 18% and could go higher if India does not fully wean itself off Russian oil.

'BIG THANKS' FROM MODI

"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."

India's Trade Minister Piyush Goyal said the deal would draw the U.S. and Indian economies closer together.

"This agreement unlocks unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers to Make in India for the world, Design in India for the world, and Innovate in India for the world. It will help India get technology from the U.S.," Goyal said in a post on X.

The deal comes less than a week after India signed a long-awaited trade deal with the European Union that is expected to eliminate or reduce tariffs on 96.6% of traded goods by value. That deal excludes EU soybeans, beef, sugar, rice and dairy from tariff reductions.

The Trump administration has been racing to complete framework trade deals with major trading partners before the U.S. Supreme Court rules on whether to strike down Trump's "reciprocal" tariffs under the International Emergency Economic Powers Act.

Trump administration officials reached a deal with Taiwan last month and say such agreements are expected to continue no matter what the court rules, as they will reimpose tariffs under other authorities.

WESTERN HEMISPHERE OIL

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 followed 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 enacted 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.

(Reporting by Bhargav Acharya in Toronto, David Lawder and Andrea Shalal in Washington and Aftab Ahmed in New Delhi; Writing by David Lawder and Susan Heavey; Editing by Doina Chiacu, Michelle Nichols and David Gregorio)