U.S. and India Forge Trade Truce, Slashing Tariffs in Deal Tied to Energy and Ukraine

In a move that recalibrates a key geopolitical and economic partnership, the United States and India announced a major trade agreement Monday, bringing a months-long tariff standoff to a close. The deal, revealed by President Donald Trump, significantly lowers duties and is explicitly tied to India's commitment to shift its energy imports away from Russia.

The agreement comes five months after the U.S. imposed punitive 25 percent tariffs on India for its continued purchases of Russian oil. President Trump stated on Truth Social that the new terms would slash India's overall tariff burden from a peak of 50 percent. "Prime Minister Modi is one of my greatest friends," Trump wrote, noting that during a Monday call, the Indian leader agreed to halt Russian oil imports and instead source energy from the U.S. and other nations like Venezuela.

In return, the U.S. administration has agreed to reduce India's "reciprocal" tariffs under the International Emergency Economic Powers Act (IEEPA) from 25 percent to 18 percent. India, in turn, will eliminate tariffs on U.S. imports and draw down non-tariff barriers. According to the announcement, India has committed to purchasing over $500 billion in American energy, technology, coal, and agricultural products.

Prime Minister Narendra Modi echoed the sentiment on social media, expressing delight that "Made in India" products would face lower tariffs. "When two large economies and the world's largest democracies work together, it benefits our people and unlocks immense opportunities," he stated.

The breakthrough follows a series of unilateral tariff reforms recently unveiled by India. Over the weekend, Finance Minister Nirmala Sitharaman outlined a budget plan targeting a $1 trillion export goal, which included slashing duties on raw materials and capital goods—particularly those essential for the energy sector, like lithium-ion battery production. These cuts are designed to reduce dependency on China and attract foreign investment.

"We face an external environment where trade and multilateralism are imperiled," Sitharaman said in her speech, justifying the broad duty drawdowns. Specific measures for the textile and leather sectors include duty-free imports for certain inputs and an extended timeline for exporting finished goods from six months to one year. The government also announced initiatives like "Samarth 2.0" for workforce upskilling and "Mega Textile Parks" to boost technical textiles.

Analysis & Reaction: The deal marks a strategic pivot for India, aligning its energy security more closely with Western interests amid the Ukraine war while securing better access to the U.S. market. For the U.S., it represents a tangible win in decoupling Russia from the global economy and bolstering a regional counterweight to China. However, experts caution that the long-term success hinges on implementation and whether the promised purchase volumes materialize.

Raj Mehta, Trade Analyst in New Delhi: "This is a pragmatic recalibration. India gains tariff relief and demonstrates strategic autonomy by diversifying energy partners, while the U.S. strengthens a critical Indo-Pacific alliance. The textile duty reforms announced separately are a crucial boost for domestic manufacturing competitiveness."

Anjali Rao, Small Business Owner (Textiles), Chennai: "Finally, some relief! The extended export period for finished goods and duty-free inputs will help us plan better and compete globally. This deal feels like a recognition of our sector's potential."

Professor Arjun Patel, Economics, University of Mumbai: "The $500 billion purchase commitment is staggering and raises questions. Is this a genuine market-driven shift or a politically negotiated figure? There's a risk this becomes another 'deal in principle' where the devilish details later undermine the headlines."

Michael Briggs, Former Trade Official, Washington D.C.: "Linking tariff relief directly to halting Russian oil purchases is a blunt but effective instrument. It's a clear victory for the administration's foreign policy-through-trade approach. However, pivoting to Venezuelan oil simply trades one problematic regime for another—it's geopolitical whack-a-mole, not a coherent energy strategy."