The United States and India have reached a sweeping trade agreement that will slash tariffs and dramatically reshape one of the world’s largest bilateral trading relationships, President Donald Trump announced Sunday.
The deal, finalized after a direct call between President Trump and Indian Prime Minister Narendra Modi on Feb. 2, will see both nations immediately begin lowering import duties on a broad range of goods. Trump said the United States will reduce its reciprocal tariff rate from 25 percent to 18 percent, while India has agreed to cut its own tariffs and non-tariff barriers on American exports to zero.
Trump said the agreement also includes a commitment from India to purchase “much higher levels” of U.S. products across key sectors — including energy, technology, agriculture, and manufacturing — totaling over $500 billion. If realized, that pledge could reverse India’s $45.8 billion trade surplus with the United States and make Washington one of New Delhi’s dominant trading partners.
As part of the new framework, India has agreed to end purchases of Russian crude oil, which the White House said will reduce Moscow’s ability to finance its war in Ukraine. India, one of Russia’s largest oil buyers, had continued purchasing discounted barrels despite Western sanctions. Trump said New Delhi’s shift will “help stop the war and stabilize global markets.”
The new trade accord follows months of friction between Washington and New Delhi. In 2025, the Trump administration imposed 50 percent tariffs on Indian imports after negotiations over market access and Russian oil purchases collapsed.
Sunday’s breakthrough reverses that trajectory. “Our amazing relationship with India will be even stronger going forward,” Trump wrote on Truth Social. “Prime Minister Modi and I are two people that get things done.” Modi, in a reciprocal statement on X, said he was “delighted” by the deal and praised Trump as a “great friend of India.”
The announcement drew immediate attention from global markets, with analysts predicting that lower trade barriers between the world’s two largest democracies could boost supply chains, investment flows, and defense cooperation. The move also positions India as a central partner in the administration’s broader effort to diversify supply chains away from China.
In Washington, the Commerce Department hailed the deal as a “major milestone” for American exporters. “This is about real market access for U.S. companies and a fair playing field for American workers,” Commerce Secretary Howard Lutnick said in a statement.
The deal also follows a string of global trade developments involving both countries. Just one week earlier, India signed a landmark free trade agreement with the European Union, described by European Commission President Ursula von der Leyen as the “mother of all deals.” That agreement will gradually phase down tariffs on European goods over the next decade.
By contrast, the Trump-Modi accord delivers immediate tariff cuts and commits India to large-scale American purchases, offering what U.S. officials describe as “instant economic impact.”
Trade analysts note that India’s new 18 percent U.S. tariff rate places it roughly in line with other emerging Asian economies such as Vietnam and Sri Lanka, while remaining slightly higher than Japan and South Korea’s 15 percent levels under existing trade frameworks.
The development comes amid broader signs of U.S. manufacturing strength. On Friday, two major surveys showed American factory activity rebounding sharply at the start of 2026. The Institute for Supply Management’s manufacturing index rose to 52.6 in January — its first reading in expansion territory in a year — while S&P Global’s manufacturing PMI climbed to 52.4, its highest since mid-2022.
S&P Global chief economist Chris Williamson said the pickup in production reflects “improving demand, lower interest rates, and more government support,” though he cautioned that global trade uncertainty remains a risk. Both surveys cited tariffs as a factor in higher input costs but said new export orders were improving, helped by stronger foreign demand.
Commerce Secretary Lutnick pointed to the U.S.–India trade breakthrough as evidence of what he called “America’s manufacturing revival.” He said U.S. firms signed more than $240 billion in foreign government procurement contracts in 2025, nearly triple the prior year, supporting an estimated 844,000 American jobs.
“President Trump’s America First trade agenda is driving down imports and surging exports,” Lutnick said. “This deal with India will keep that momentum going.”
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