India-US trade: Months after the United States imposed combined 50% tariffs on India (25% reciprocal tariff and 25% “punishment” tariff for buying Russian oil), President Donald Trump said the duty will be reduced to 18% following a conversation with Prime Minister Narendra Modi.
Announcing the reduction in a post on Truth Social, Donald Trump called Modi one of his “greatest friends” adding that India has “agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela”.
“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%,” he wrote.
Trump claimed that India will stop buying Russian oil, besides reducing tariffs and non-tariff barriers against US to zero, and committing to ‘Buy American’ and $500 billion of US agricultural, coal, energy and technology products.
Notably, while Modi in a post on X also announced that the US has cut tariffs on Indian products to 18%, he did not share any details of the deal.
Trump tariffs: How does India fare against China, Pakistan, and South Korea?
Donald Trump said that following a phone call with PM Modi, he would cut a US levy on Indian goods to 18% from 25%. According to a Bloomberg report citing officials, this includes removing the 25% tariff imposed as “punishment” for Russian oil purchases and reduced the reciprocal tariff rate from 25% to 18%,
- Here’s who has lower tariffs compared to India: European Union, Japan, South Korea, and Switzerland: 15% US tariffs, while the United Kingdom: 10% rate.
- Countries with comparable rates in South and Southeast Asia include: Vietnam and Bangladesh (20%), and Pakistan, Malaysia, Cambodia and Thailand (19%).
- Further, countries with tariffs higher than India are: Brazil (50%), China (37%), Laos and Myanmar (40%), and South Africa (30%).
Notably, in Asia, India has the second highest tariffs from the US, after only Japan and South Korea, which have for long been US allies.
India fared overall better compared to BRICS counterparts. However, when compared to its neighbours (Bangladesh, Pakistan), only China has significantly different rates compared to India, and this comes amid Donald Trump’s long-run anti-China campaign.
Why did India start buying Russian oil?
Notably, India has not traditionally been a big importer of Russian oil — that has been the European Union (EU). However, amid sanctions and pushback against Russia’s invasion of Ukraine in 2022, India made the most of the discounted rates from Moscow, as per a Bloomberg report.
Notably, in October too Donald Trump said that Modi had agreed to stop buying Russian oil. Later the US also imposed sanctions on Russia’s biggest oil producers, Rosneft PJSC and Lukoil PJSC, diminishing appetite more significantly.
India-US trade deal: Long in the works
India was among the first to open trade talks with the Trump administration, but the progression has been rocky. Till later 2025, the India-US trade deal was a will-they, wont-they speculation. US Trade Representative Jamieson Greer said last Tuesday that while India had “made a lot of progress” on curbing Russian oil buys but “they still have a way to go on this point”, the Bloomberg report added.
It added that details of the trade deal are still awaited, with the exact scale of reduction of Russian oil purchases and increase in US agricultural imports yet unknown.
(With inputs from Bloomberg)
Key Takeaways
- The reduction in tariffs from 25% to 18% will enhance India’s trade competitiveness.
- India’s commitment to curtail Russian oil purchases may shift its geopolitical stance towards the US.
- The deal has potential positive impacts on India’s GDP growth and stock market performance.