U.S. President Donald Trump announced on Monday that a trade agreement has been reached with India to reduce U.S. tariffs on Indian goods from 50% to 18%. In return, India will lower trade barriers, halt its purchases of Russian oil, and consider buying oil from the U.S. and potentially Venezuela. The agreement was made following a conversation between Trump and Indian Prime Minister Narendra Modi.
As part of the deal, the United States will reduce its Reciprocal Tariff from 25% to 18%. Additionally, the U.S. will eliminate a punitive 25% duty on all imports from India related to its Russian oil purchases. Modi also pledged to purchase over $500 billion worth of U.S. energy, technology, agricultural, and other products.
India heavily relies on oil imports, with approximately 90% of its needs covered by imports. The country has started to decrease its Russian oil purchases, with projected declines in the coming months. Indian markets have been negatively affected by the tariffs imposed by the U.S., leading to significant outflows of foreign investors and making it the worst-performing market among emerging nations in 2025.
The news of the trade deal boosted U.S.-listed shares of major Indian companies. Infosys, Wipro, HDFC Bank, and the iShares MSCI India exchange-traded fund all saw gains in response to the agreement. Prime Minister Mark Carney is set to visit India in the near future to strengthen economic ties and work towards a new trade agreement called a Comprehensive Economic Partnership Agreement (CEPA).
Trump hinted at a potential agreement for India to purchase Venezuelan oil after recent geopolitical events. The trade deal marks a significant development after months of intense negotiations between the United States and India. Trump had previously increased tariffs on Indian imports to pressure the country to stop buying Russian oil, indicating that rates could rise further if India did not comply. The potential purchase of Venezuelan oil by India aims to offset the Russian oil imports, as India is the world’s third-largest oil importer.