US Slashes India Tariffs To 18% As Trump Announces Trade Deal: What We Know So Far

Last Updated:February 03, 2026, 10:04 IST

Lower US tariffs mean Indian exporters face fewer cost barriers to enter the American market, especially in sectors like textiles, apparel, seafood, chemicals and auto components

US President Donald Trump with PM Narendra Modi (Photo: AP)

In a major diplomatic breakthrough after months of intense negotiations and tense moments, India and the United States finalised a trade deal, with US President Donald Trump slashing tariffs from 25 per cent to 18 per cent after a call with Prime Minister Narendra Modi late on Monday.

Trump, while announcing the details of the phone conversation, said Washington would reduce the tariff it had earlier imposed on Indian goods—effective immediately. He claimed that in return, India would move to cut its own tariffs and non-tariff barriers against US products to “zero".

Reciprocating the gesture, PM Modi took to social media to say he had a “wonderful" conversation with Trump and thanked him for lowering tariffs on Made in India products to 18 per cent. However, he steered clear of any commitment to halt purchase of Russian oil or reduction of all tariffs and non-tariff barriers to zero—as claimed by the US President.

As the two countries mark a historic moment in negotiations, here’s what we know so far:

Trade Deal & Tariffs: What Is The Agreement?

In the absence of a formal statement drawing out the contours of the trade deal, there is still some ambiguity over what the two leaders agreed to. While the Indian side did not clarify its stand on buying Russian oil or purchasing $500 billion worth of US goods, the fact that a 50 per cent US tariff on India—one of the highest rates slapped on any country—will come down to 18 percent is a significant achievement.

The deal comes just days after India and the European Union announced what both sides referred to as “mother of all" trade deals. While EU is India’s largest trading partner as an economic bloc, US continues to be the single-largest trading partner.

Based on social media posts by Trump and PM Modi, we now know that:

• Reciprocal tariffs on India reduced to 18 per cent

• Trump has said India will reduce its tariffs on US products to 0 per cent

• The US President claims India will stop buying Russian oil

• India has committed to buy $500 billion of US energy, tech, agriculture, coal, Trump said

• The new tariff rate is effective immediately

Market Access

Lower US tariffs mean Indian exporters face fewer cost barriers to enter the large American market, especially in sectors like textiles, apparel, seafood, chemicals and auto components. With the rate cut to 18 per cent, India may now be better placed than competitors such as Vietnam, Thailand, and Indonesia, in some US markets.

Trade analysts highlight that specific Indian export sectors will gain access and competitiveness thanks to lower duties. These include:

• Textiles & apparel: The US absorbs ~28% of India’s textile exports; lower tariffs will help restore competitiveness and pricing power.

• Seafood: India is a top shrimp supplier to the US; tariff cuts boost export prospects.

• Auto and auto ancillaries: Reduced trade costs can help sustain US orders and strengthen India’s role in global supply chains.

• Chemicals and consumer goods: Lower barriers make US market entry easier for chemicals and certain packaged foods.

In return, India has agreed to lower its own import tariffs on American products, effectively opening the Indian market further to US exporters, including energy, technology, agriculture, coal and others. It is important to note again, however, that the deal reportedly includes zero tariffs and barriers for many US goods, though formal schedules and timelines haven’t yet been made public.

Russia-Ukraine War & Venezuelan Oil

On social media, President Trump said India would halt purchases of Russian oil and instead increase energy imports from the US and potentially Venezuela as part of the trade agreement, framing the shift as helping to “end the war with Russia and Ukraine". “This will help END THE WAR in Ukraine, which is taking place right now, with thousands of people dying each and every week!"

The US had imposed a punitive 25 per cent tariff on Indian imports specifically because India was buying Russian crude, which doubled India’s overall tariff burden. According to Reuters, earlier tariff hikes (up to 50 per cent) were connected to India’s Russian oil imports, and removing the extra tariff was linked to India’s reported agreement to curb those purchases.

While Trump may have claimed that India agreed to stop buying Russian oil, there has been no commitment from the Indian side about the same. PM Modi also stopped short of confirming the same in his social media post, sticking to thanking the US President for reduction in tariffs.

Sergio Gor: The Crucial Link

Before Trump announced the historic deal on social media—replete with big numbers and capital letters—it was his trusted lieutenant in New Delhi, Sergio Gor, who sent both countries into a tizzy on Monday by dropping a big hint.

Gor, 38, assumed office as the US ambassador to India just a month ago and has already emerged as a central figure in Trump’s efforts to recast US-India ties at a moment shaped by tariff frictions and wider strategic challenges. Even before formally taking charge, Gor arrived bearing a gift—a photograph of Prime Minister Narendra Modi with Trump, signed by the US President and inscribed with the words: “Mr Prime Minister, you are great."

The trusted Trump ally’s selection was widely read in diplomatic circles as a deliberate move by Washington to station a hands-on envoy in New Delhi—someone with immediate access to, and influence within, the Oval Office.

Speaking with CNN-News18 after the deal was announced, Gor said, “The credit goes to President Trump and Prime Minister Modi…The two leaders have a great personal relationship is something that carries this deal forward. The potential between India and the United States is limitless."

‘PM Modi A Friend’

Beyond the economics and tariffs, what stood apart in the announcements by both Trump and Gor was the deep personal rapport that the US President shares with PM Modi.

Trump said his agreement with India came “out of friendship and respect for Prime Minister Modi" when announcing the tariff cuts to 18 per cent. In his social media post, he wrote that it was “an honour to speak with Prime Minister Modi… He is one of my greatest friends and, a powerful and respected leader of his country".

Taking to X, Gor too said that “President Trump genuinely considers Prime Minister Modi a great friend!" and praised the trade deal, underscoring the strong US–India relationship.

Reciprocating the gesture, PM Modi posted on X that it was “wonderful to speak with my dear friend President Trump today."

The repeated use of the word “friend" by Trump—and amplified by Gor—comes at a moment when India-US ties were under real strain: elevated tariffs, disagreements over Russian oil, and wider geopolitical pressures linked to Ukraine. The trade deal itself was not just technical or economic; it was announced and framed as the product of a personal conversation between Trump and PM Modi rather than a routine bureaucratic negotiation.

The language underscores that the Trump-Modi relationship is driven heavily by personal rapport, with trust between the two leaders shaping outcomes alongside formal negotiations. By calling PM Modi a friend, Trump was signalling to domestic and international audiences that India is viewed as a special partner—distinct from other countries facing US trade pressure.

Reactions After The Deal

The first to react after the announcement was Indian markets. Indian equity benchmarks opened the week on a decisive high, buoyed by the breakthrough in the India–US trade agreement that reignited investor sentiment. The Sensex surged nearly 2,300 points at the open, while the Nifty added around 700 points in early deals, marking a swift turn from restraint to risk-on optimism.

Support from the United States was also swift. US Under Secretary of State Jacob Helberg welcomed the deal, saying it would deepen industrial collaboration and create momentum for specific joint projects, including in critical minerals and technology cooperation.

External Affairs Minister S Jaishankar, who is in the United States, said he “welcomed the announcements on bilateral trade". In a post on X, he said: “This will create more jobs, spur growth and promote innovation in both economies. It will strengthen ‘Make in India’ endeavors and encourage trusted technology ties."

Union Home Minister Amit Shah called this “a big day for India-U. relations", congratulating both PM Modi and Trump for this “historic deal".

Union Minister Ashwini Vaishnaw said India and US together have huge potential to work for peace and development. “US and India are world’s largest democracies. Both countries are natural allies. Together, India and US have huge potential to work for peace and development," he said on X.

However, the Indian opposition was not impressed. Congress leader Jairam Ramesh said Trump seemed to have leverage over PM Modi. “He [Trump] announced the halt of Op Sindoor from Washington DC. He announced the updates on India’s oil purchases from Russia and Venezuela from Washington. He’s now announced an India-U.S. Trade Deal from Washington, the full details of which are awaited. President Trump clearly seems to have some leverage over Prime Minister Modi – who is now mortified of even being seen with him, let alone engage in the usual bout of hugs".

Ramesh also criticised the pattern in which Indians were reportedly learning about their government’s actions from announcements by the US president. “It seems that Prime Minister Modi and President Trump spoke to each other today. This information has been provided not by the Indian side but by the US Ambassador to India. This now seems to be the routine – India gets to know of its government’s actions only from President Trump or his appointees. Trump-nirbharta," he said.

News explainers US Slashes India Tariffs To 18% As Trump Announces Trade Deal: What We Know So Far

Read More