Prime Minister Narendra Modi and US President Donald Trump have confirmed a major trade deal under which American tariffs on Indian goods have been reduced from 25% to 18% with immediate effect, with both leaders terming it a significant step in strengthening bilateral ties.

President Trump announced the deal on his social media platform, with Prime Minister Modi confirming the development following a high-level phone conversation with the US President. 

“Wonderful to speak with my dear friend President Trump today,” Modi wrote. “Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement.” 

Modi highlighted that the partnership between the two democracies would open up “immense opportunities for mutually beneficial cooperation.”

President Trump said India agreed to stop buying Russian oil and would “buy American” products at much higher levels under the deal. He also said the agreement includes more than $500 billion in commitments for US energy, technology, agricultural products, and coal. “He agreed to stop buying Russian oil, and to buy much more from the United States and, potentially, Venezuela,” Trump wrote.

A timeline of US tariffs on India

On April 5, 2025: The US introduced a 10% baseline tariff on all imported goods, including those from India, as part of President Trump’s broader plan to cut the US trade deficit and support domestic industry. 

April 2–9, 2025: Washington announced higher, country-specific reciprocal tariffs including a 26% rate for India scheduled to start April 9. India and other countries pushed back, and on April 9 the implementation was paused for 90 days while talks continued, though the 10% base tariff stayed in place. 

July 8, 2025: The pause on nation-specific tariffs was extended again until August 1 to give room for negotiations over a broader trade deal.

August 2025: Escalation tied to Russian oil

August 7, 2025: After talks made little progress, an executive order brought in a 25% tariff on most Indian goods, combining the baseline and the reciprocal levy. This was justified by the US as pressure over trade practices and India’s continued purchase of Russian oil.

August 27, 2025: A further 25% penalty tariff took effect on top of the existing rates, pushing the total rate to 50% on many Indian products. This was explicitly linked to continued Russian oil imports and aimed at cutting Russian revenue, making India one of the most heavily tariffed partners at the time. 

Broader impact

Market reaction was positive immediately after the announcement. Indian exporters, especially, in sectors such as textiles and leather, welcomed the cut in tariffs. Financial markets also showed sharp gains, as the uncertainty from last year’s trade tensions eased. 

The deal marks a reset in trade ties after months of sharp tariff increases and diplomatic strain. Leaders from both the countries said they hope this agreement will boost economic cooperation and strengthen their strategic partnership in the years ahead.