U.S. President Donald Trump announced he will lower a key tariff on Indian goods from 25% to 18% following an agreement with Prime Minister Narendra Modi for India to stop purchasing Russian crude oil. The deal, announced Monday, also includes a sweeping Indian commitment to buy over $500 billion in American products and reduce its own trade barriers.
What Trump Claims PM Modi Agreed To?
The agreement, detailed by President Trump in a Truth Social post on Monday, February 2, centers on immediate U.S. tariff relief. “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 stated. In return, India will “move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO” and massively increase purchases of U.S. goods.
What is the Russian Oil Connection?
A direct condition for the tariff reduction was India’s energy policy. Trump explicitly linked the deal to Modi’s agreement “to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela.” Trump had previously doubled a tariff on Indian exports to 50%, accusing India of supporting Russia’s war in Ukraine through its oil purchases. Whether the proposed reduction applies to the separate Russian oil penalty, the reciprocal tariff, or both was not immediately made clear by the White House.
How Did Financial Market React?
Indian financial markets reacted positively to the news of de-escalation. Key indicators saw immediate gains:
- Futures for India’s Nifty 50 index surged as much as 3.8% in trading at the Gujarat International Fin-Tec City.
- The US-listed iShares MSCI India ETF rose as much as 2.4%.
- The Indian rupee gained 1% against the U.S. dollar in offshore trading.
What is India’s Purchase Pledge?
Beyond the tariff terms, the deal includes a massive commercial commitment from India. Prime Minister Modi committed to a “BUY AMERICAN” policy involving “over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products,” according to Trump’s statement. This long-term purchase agreement represents a significant potential boost for multiple U.S. export sectors.
Disclaimer: This information is based on inputs from news agency reports. TSG does not independently confirm the information provided by the relevant sources.
