India-US Trade Deal Cuts Tariffs to 18 Percent

India and the United States have announced a significant bilateral trade agreement that lowers reciprocal tariffs and reshapes economic ties between the two countries. The deal, announced by US President Donald Trump after a phone conversation with Prime Minister Narendra Modi, reduces US tariffs on Indian goods from 25 per cent to 18 per cent with immediate effect.

Key features of the trade agreement

Under the agreement, the United States will lower duties on Indian exports, improving their competitiveness in the American market. In return, Washington claims that India has agreed to reduce tariffs and non-tariff barriers on US products to zero. The deal also includes provisions related to energy trade, with India expected to increase its purchases from the US and cease buying Russian oil, according to American officials.

Political and diplomatic responses

President Trump described Prime Minister Modi as a close friend and respected leader, calling the agreement a major breakthrough for both economies. Responding publicly, Prime Minister Modi welcomed the reduction in tariffs on Made in India products and expressed optimism about deeper economic cooperation. A White House official later clarified that the US would also withdraw an additional 25 per cent tariff imposed earlier over India’s purchase of Russian oil.

Economic impact and sectoral gains

External Affairs Minister S Jaishankar said the deal would boost job creation, spur economic growth, promote innovation, and strengthen India’s flagship Make in India initiative. Commerce and Industry Minister Piyush Goyal added that the agreement unlocks unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers, while enabling co-creation of technologies between the two democracies.

Important Facts for Exams

• Reciprocal tariffs refer to matching import duties imposed by trading partners.
• The US reduced tariffs on Indian goods from 25% to 18% under the deal.
• Make in India is India’s flagship manufacturing and investment initiative.
• Energy trade has become a strategic component of India-US relations.

Strategic significance for bilateral ties

The agreement is seen as a meaningful shift in India’s export competitiveness, especially for sectors heavily dependent on the US market. By easing trade barriers and strengthening trusted technology partnerships, the deal reinforces India-US strategic alignment and positions both economies for deeper cooperation amid evolving global trade dynamics.