Flags of India and the US.
Credit: iStock Photo
New Delhi: US President Donald Trump on Monday announced a trade deal with India that slashes US tariffs on Indian goods to 18 per cent from 50 per cent in exchange for India halting Russian oil purchases and lowering trade barriers.
Trump said the deal involved higher Indian purchases of US energy, coal, technology and farm products, and is the first phase of a broader pact to be negotiated later.
Here are key details so far:
Boost to US energy, defence, tech purchases
India will increase purchases of US petroleum, defence equipment, electronics, pharmaceuticals, telecom products and aircraft with some farm market access also offered. Buying commitments will be spread over several years.
Although Trump said India would cut tariffs to zero, it is not yet clear which products will see zero duties or phased cuts, as in India's EU and UK trade deals.
In 2024, America’s agricultural trade deficit with India was 1.3 billion dollars.
Gains for India
Exporters say the cut in US tariffs to 18 per cent will significantly boost Indian exports including textiles and apparel, pharmaceuticals, chemicals, footwear, jewellery, and food items like shrimp, putting them on par with Asian peers such as Vietnam and Bangladesh.
Russian oil
Indian refiners have been reducing Russia oil purchases and diversifying supplies toward the US, Middle East, Africa and South America. However, refiners will need a wind-down period to exit existing Russian contracts, and the government has not yet ordered a full halt, refinery sources said.
Bilateral trade
After the US tariff hike in late August, sectors such as textiles, jewellery and shrimp were hit, though discounts helped exporters retain buyers.
Still, exports to the US in January–November period rose 15.9 per cent year-on-year to 85.5 billion dollars, while imports reached 46.1 billion dollars, government data showed.
Two-way goods and services trade reached 212.3 billion dollar in 2024, with a 45.8 billion dollar US goods trade deficit and a small services trade surplus, according to US government estimates.
Tariffs on steel, aluminium
Analysts said although reciprocal tariffs may be lowered under the framework, US Section 232 duties on steel, aluminium, copper, automobiles, auto parts and some other goods are likely to stay.
Engineering goods exports to the US rose about 5 per cent year-on-year to 14.68 billion dollars in the first nine months of 2025/26, industry estimates show.
As a result, an estimated portion of India’s exports to the US will continue to face higher tariffs despite the trade deal.
Boost to investors' sentiment
The deal announcement boosted investor sentiment, with rupee against dollar rising over 1 per cent on Tuesday, the benchmark stock index, the Nifty 50 gaining about 3 per cent after jumping as much as 5 per cent, and the 10-year bond yield felling around 5 basis points.
Analysts said the pact could support exports, capital inflows and the rupee, though a full halt to Russian oil purchases may take time to implement.