Trump-Modi trade deal signals shift in energy, tech, and geopolitical ties

New Delhi: The United States will reduce the so-called ‘reciprocal tariff’ on import of goods from India from the current 25% to 18%, US President Donald Trump announced on Monday after talking to Prime Minister Narendra Modi on phone.

Trump also claimed that India has agreed to cut non-tariff barriers and allow duty-free import of American goods.

“Out of friendship and respect for Prime Minister Modi and, as per his request, 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 said in a social media post.

“They will likewise move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO,” he added.

Though Prime Minister Modi confirmed the US decision on cutting the tariffs, there is no clarity on India’s offer for the deal.

“Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement,” Modi said in a post on X.

“When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation,” Modi added.

The development comes nearly a year after the announcement about the deal. The announcement about the Bilateral Trade Agreement was made on February 13 last year when Modi visited Washington.

The negotiation was formally launched in March 2025 with a target to close the first tranche of the deal by September-October. However, the Trump administration’s unilateral decision to impose high tariffs negatively impacted the progress on the talks.

With effect from August 27, 2025, Trump administration has imposed a steep 50% tariff on import of a majority of Indian goods. This includes 25% reciprocal tariffs and an additional 25% penal tariff for India’s economic engagement with Russia.

While Trump has talked about lowering the reciprocal tariff to 18% from the existing 25%, confusion remains over the 25% penal tariff.

“Trump says US tariffs will fall from 25% to 18%. However, since the post also refers to India stopping Russian oil purchases—linked earlier to punitive tariffs—it is unclear whether the cut is actually from 50% to 18%, or whether Trump misstated the starting tariff level,” said Global Trade Research Initiative (GTRI) founder Ajay Srivastava.

Despite the reduction, tariffs on Indian goods would remain among the highest in the American markets. The Trump administration has already entered into deals with several countries offering lower tariffs, like the UK (10%) and EU (15%).

In the Truth Social post, Trump claimed that Modi committed to “Buy American” at much higher levels, including purchases of more than $500 billion worth of US energy, technology, agricultural products, coal, and other goods.

“At present, India’s annual imports of goods and energy from the U.S. are under $50 billion. Reaching $500 billion would likely require more than 20 years, suggesting the figure refers to a long-term aspiration rather than a near-term commitment,” Srivastava said.