US – India Seal Historic Trade Deal, Tariff Drops From 25% to 18% in New Agreement | Here’s What it Means

US India Trade Deal: The United States and India have agreed to a major new trade deal, U.S. President Donald Trump announced Monday. The agreement immediately reduces a key reciprocal tariff and includes significant Indian commitments to purchase American energy and agricultural products.

Who Announced the US-India Trade Deal?

President Donald Trump announced the bilateral trade agreement in a post on his Truth Social account on Monday, February 2. He stated he had spoken with Indian Prime Minister Narendra Modi that morning, calling him “one of my greatest friends” and “a Powerful and Respected Leader.” The announcement followed multiple rounds of negotiations and recent diplomatic engagement, including the new U.S. Ambassador to India, Sergio Gor, taking up his post.

What Does the US-India Trade Deal Include?

The core trade agreement has several key components. The U.S. will immediately reduce a reciprocal tariff on Indian exports from 25% to 18%. In return, India agreed to move toward eliminating its tariffs and non-tariff barriers against U.S. goods. President Trump stated Prime Minister Modi committed to a “BUY AMERICAN” policy, involving over $500 billion in future purchases of U.S. energy, technology, agricultural, coal, and other products.

Why Was This Tariff Originally Imposed?

President Trump had initially imposed a 25% tariff on Indian exports late last year after a deadline for a deal lapsed. He later doubled the tariff to 50%, accusing India of supporting Russia’s war against Ukraine by purchasing Russian oil. In his announcement, Trump linked the new agreement to India’s pledge to stop buying Russian oil and instead purchase more from the United States and potentially Venezuela, stating this “will help END THE WAR in Ukraine.”

How Did the Negotiations Progress?

Recent signals pointed to a breakthrough. Just before Trump’s announcement, Ambassador Sergio Gor posted on social media platform X, “President Trump just spoke to PM Modi. Stay tuned…” Earlier on Monday, Indian Commerce Secretary Rajesh Agarwal told CNBC-TV18 that “sticky issues” in the talks had been addressed and there was “a lot of convergence” on the reciprocal tariff issue.

Key Points in the Deal:

• Reciprocal tariff reduced from 25% to 18%, effective immediately.
• Future Indian purchase commitments exceed $500 billion for U.S. goods.
• Indian pledge to move toward “ZERO” tariffs and non-tariff barriers on U.S. imports.