India, US shake hands on a new trade plan

Deal includes a halt to oil purchases from Russia.

Think about the things students use every day — clothes, shoes, mobile phones, laptops or even the fuel that helps buses and trains run. Many of these items are made using parts that come from different countries. When countries trade with each other, they decide how easy or expensive it should be to buy and sell these products.

In a new move, India and the United States have announced a trade deal that could change how goods move between the two countries.

US President Donald Trump said the United States will reduce taxes on goods imported from India. Earlier, these taxes were as high as 50%. Under the new agreement, they will be cut to 18%, making Indian products cheaper to sell in the US.

What is a tariff?

Imagine your school canteen buys biscuits from a nearby shop. If the shop adds an extra charge on those biscuits, the canteen has to pay more, and the biscuits may become more expensive for students. A tariff works in a similar way. It is an extra tax a country puts on products it buys from another country.

In return, India has agreed to stop buying oil from Russia. Instead, it will buy more oil from the United States and may also purchase oil from Venezuela. India has also agreed to make it easier for American products to enter Indian markets by lowering trade barriers.

Trump also said India has agreed to buy more American products in the coming years. These include energy such as oil and coal, as well as technology, agricultural goods and other items. (With inputs from Reuters)