• The US and India finalize a trade agreement reducing US tariffs on Indian exports from 25% to 18%, following a call between President Donald Trump and Prime Minister Narendra Modi on February 2, 2026.
  • India commits to halting Russian oil purchases, increasing US imports by over $500 billion in energy, technology, agriculture, and coal, and reducing its own tariffs and non-tariff barriers to zero.
  • The deal reverses punitive US tariffs imposed in March 2025 due to India's Russian oil imports, with immediate market impacts including a plunge in global oil prices and enhanced competitiveness for Indian manufacturers.

In a move that reshapes bilateral trade dynamics, the US and India have struck a deal slashing US tariffs on Indian exports, a significant shift from the 25-50% rates imposed last year. Announced via a Truth Social post by President Trump, the agreement follows a direct conversation with PM Modi, whom Trump praised as a "friend" and "leader who gets things done." Indian officials confirmed the details through an ambassador's X post, though attempts to reach spokespeople for further comment were unsuccessful as of press time.

The tariff reduction to 18% provides immediate relief for Indian exporters, particularly in sectors like manufacturing and textiles, which had faced higher costs accessing the US market. According to people familiar with the negotiations, this was a key concession aimed at boosting "Made in India" products while addressing US concerns over India's energy imports. In exchange, India has pledged to stop buying Russian crude—a move that Treasury officials noted has already led to a sharp drop in such imports—and ramp up purchases from the US and potentially Venezuela, reversing a 2025 halt triggered by US tariffs.

Market reactions were swift, with oil prices plunging post-announcement as traders anticipated reduced Russian exports and stabilized global flows. For US farmers and energy firms, the deal promises a surge in sales to India, the world's third-largest crude importer, with commitments exceeding $500 billion across multiple sectors. This aligns with broader efforts to diversify supply chains amid geopolitical disruptions, coming on the heels of India's recent FTA with the EU that cuts tariffs on nearly all goods by value.

Behind the scenes, the agreement reflects a pragmatic balancing act. India preserves its "strategic autonomy" by protecting sensitive areas like agriculture and dairy, while offering a "Buy American" pledge to offset US tariff relief. Analysts see it as a hedge against unpredictability in US trade policy, with the EU deal serving as a parallel buffer. Without this accord, Indian exporters would have continued facing punitive barriers, potentially stifling growth in key industries.

Looking ahead, the short-term focus is on implementing the tariff cuts and oil shifts, which could ease funding for the Ukraine war and lower consumer prices in India. Long-term, it strengthens US-India ties, with potential for zero tariffs both ways boosting bilateral trade. Experts note that while the EU remains a larger bloc partner, this deal sets a model for resilience in volatile times. As one source put it, "It's a win-win that recalibrates trade without upending core interests."

Correction: An earlier version misstated the timeline of US tariff impositions; they began in March 2025, not 2024.