U.S.–India Trade Deal Slashes Tariffs to 18%, Markets Cheer

 

Washington and New Delhi have struck a fresh trade understanding that signals a reset in economic relations between the world’s two largest democracies — and markets are already cheering.

US President Donald Trump announced that the United States will lower tariffs on Indian goods to 18 percent, down from earlier levels that had climbed as high as 25 percent and more. The move follows discussions with Indian Prime Minister Narendra Modi and is aimed at easing months of trade friction, particularly around India’s purchases of Russian oil.

Calling Modi “one of my greatest friends,” President Trump said the agreement was reached “out of friendship and respect,” adding that it takes effect immediately. According to the White House, the deal also removes an additional tariff penalty that had been imposed on India over its Russian oil imports.

A key element of the understanding is India’s commitment to shift away from buying Russian oil and increase its energy purchases from the United States, and potentially Venezuela. President Trump framed the move as part of a broader effort to cut off funding streams linked to the Ukraine war and push toward an end to the conflict.

Beyond energy, Trump said India has agreed to significantly expand imports of American products — spanning energy, technology, agriculture, coal, and other sectors — with total purchases projected to exceed $500 billion. While detailed sector-by-sector terms have yet to be released, the announcement alone was enough to spark optimism among investors.

Simply put, we will be an American Colony.

US will have tariff of 18% on our goods and we will charge 0% for their goods.

Resign and get lost @narendramodi pic.twitter.com/svOWLHVOLf

— Congress Kerala (@INCKerala) February 3, 2026

Markets reacted swiftly. Mumbai’s benchmark Nifty index jumped nearly five percent at the opening bell, reflecting confidence that lower tariffs could boost Indian exports and stabilize trade relations with the United States.

Prime Minister Modi welcomed the news, saying he was “delighted” that Made in India products would now face a reduced tariff rate. He praised President Trump’s leadership and emphasized the importance of strong US–India ties for global peace, stability, and prosperity.

Analysts note that the agreement comes at a pivotal moment, following India’s recent trade deal with the European Union and amid broader efforts by New Delhi to diversify its trade partnerships. At the same time, observers caution that the finer details — including timelines, product categories, and energy commitments — will be closely watched in the weeks ahead.

For now, the announcement marks a positive turn. With tariffs easing, trade flowing, and diplomatic warmth back in focus, the US and India appear ready to turn the page and write a more cooperative economic story together.