The United States and India announced a trade agreement that will cut US tariffs on Indian goods to 18 percent. Washington said it will withdraw an additional 25 percent punitive duty that had been imposed over India’s purchases of Russian oil; that punitive levy had been stacked on top of a 25 percent reciprocal tariff, creating an earlier effective rate near 50 percent. Under the new arrangement the punitive duty is being removed and the remaining reciprocal tariff trimmed to 18 percent, subject to formal notification and implementation details yet to be released.
The deal is conditional. India has agreed to halt purchases of Russian oil, reduce trade and non‑tariff barriers, and step up imports from the United States. US officials said the pact will open Indian markets to more American farm, energy and technology products — with US leaders citing a commitment by India to “buy American” and media reports referencing a pledge to purchase roughly $500 billion of US energy, tech and agricultural goods. US supporters also framed the move as a way to reduce Russian energy influence.
New Delhi reaction and diplomacy
Prime Minister Narendra Modi welcomed the agreement, saying the cut will boost “Made in India” exports and benefit both democracies. External Affairs Minister S. Jaishankar praised the deal as a growth, jobs and innovation driver that will strengthen Make in India and trusted technology ties. Union Home Minister Amit Shah called it a “big day for India‑US relations” that will deepen strategic and commercial links.
Jaishankar is in Washington from February 2–4 to attend the inaugural Critical Minerals Ministerial convened by US Secretary of State Marco Rubio, and will meet Rubio at the State Department before the ministerial. The talks come a day after the trade announcement.
Market and sector reactions
Indian markets reacted strongly: the Nifty 50 surged nearly 5 percent — its biggest one‑day gain in five years and closing close to January record highs — while the rupee rose more than 1 percent to about 90.40 per dollar in early trading. The benchmark 10‑year government bond yield fell about 5 basis points to roughly 6.72 percent. The Sensex opened sharply higher, jumping several thousand points in early trade.
Exporters also signaled gains: the Seafood Exporters Association of India (SEAI) said India’s seafood sales to the US should recover after the tariff cut. SEAI general secretary K. N. Raghavan noted that fish exports by volume fell 15 percent to 201,501 tonnes in April–November of the current fiscal year and value slipped 6.3 percent to $1.72 billion from $1.84 billion a year earlier; the lower US duty should help level the playing field.
Regional and global comparisons
The 18 percent rate gives India a competitive edge over several regional rivals — lower than China’s average US tariff exposure (around 37 percent by the cited comparison) and roughly in line with or better than Pakistan (about 19 percent) and Bangladesh (about 20 percent). However, the Indian rate remains slightly higher than the preferential rates reportedly offered to long‑standing US partners such as the EU, Japan and South Korea (around 15 percent).
Open questions
Key procedural and timing details remain unresolved: the start date for the new tariff, the timeline and verification mechanisms for ending Russian oil purchases, and the formal notifications have not been published. Further negotiations and implementing instruments are expected to follow before the adjustments take full effect.
