A. Rahman
President Donald Trump revealed on Monday that he and Indian Prime Minister Narendra Modi have struck a new trade arrangement, bringing down American tariffs on products from India to 18 percent from a previous high of 50 percent. This shift comes in return for India easing its own market restrictions, ceasing oil acquisitions from Russia, and shifting to sources like the United States and possibly Venezuela.
In a post on social media after their phone conversation, Trump explained that the adjustment was made out of regard for Modi and at his urging, dropping the reciprocal tariff rate from 25 percent to 18 percent right away. A senior White House aide clarified to reporters that this involves lifting a 25 percent penalty fee imposed on all Indian imports due to the country’s ongoing Russian oil deals, which had been added to an existing 25 percent base rate.
Trump also noted that Modi pledged to purchase over $500 billion in American goods spanning energy, tech, farming, and beyond. Modi responded enthusiastically online, expressing joy over the lower duties for Indian-made items and extending appreciation to Trump for the benefit to India’s 1.4 billion citizens.
The announcement sparked gains in stocks of leading Indian firms traded in the US, with Infosys climbing 3.53 percent, Wipro jumping 7 percent, HDFC Bank advancing 3.4 percent, and the iShares MSCI India ETF surging 3.3 percent by midday.
Just days earlier, Trump had hinted at allowing India access to Venezuelan oil following a US operation that captured Venezuela’s leader Nicolas Maduro in January. This could help fill the gap left by Russian supplies for India, the globe’s third-largest oil buyer, which meets about 90 percent of its demand through imports. Cheaper Russian crude had been a cost-saver for India since the 2022 Ukraine invasion prompted Western sanctions on Moscow’s energy sector.
Lately, India has been scaling back those imports, down to roughly 1.2 million barrels daily in January, with expectations of 1 million in February and 800,000 in March.
The pact caps off strained talks between the two major democracies. Back in August, Trump hiked tariffs to 50 percent to push New Delhi away from Russian energy, and recently warned of further increases if buys didn’t drop. Those penalties hammered Indian stocks throughout 2025, turning it into the weakest emerging market with massive foreign capital flight.
Quick Summary
Trump and Modi finalized a trade deal reducing US tariffs on Indian imports to 18% from 50%, in exchange for India ditching Russian oil, lowering barriers, and committing to $500B+ in US purchases. Stocks rallied, and Venezuelan oil may replace Russian supplies amid India’s declining imports and past market woes.
