President Donald Trump has removed an additional 25% tariff on Indian goods following India’s agreement to reduce its reliance on Russian oil and deepen trade and defense relations with the United States.
The move is a significant first step toward implementing a new trade deal announced earlier this week following a phone call between Trump and Indian Prime Minister Narendra Modi.
The White House confirmed the removal of the tariff in an executive order in which Trump stated the country had committed to not directly or indirectly importing oil from Russia. India has also agreed to purchase additional energy products from the United States and develop defense cooperation over the next decade.
The extra 25% duty had been imposed in response to US pressure on India to curb bulk imports of Russian crude. With its removal, the overall tariff on Indian goods will drop to about 18%. The revised tariffs were announced on February 7 and officially took effect at 12:01 a.m. Washington time.
This decision is a “major relief” for India, which had been confronted with tariffs of up to 50 percent on several exports since last summer — the highest level charged on any major Asian trading partner. Trump noted that India’s willingness to reduce Russian oil imports had helped him lower the tariffs.
India agrees to major purchases of US goods and energy
In return for lower tariffs, India will increase imports of American goods, with total purchases forecast at around $500 billion over the next five years. Some are going to buy US oil and gas, aircraft and aircraft parts, technology products, precious metals, and coking coal. India would also eliminate or scale back trade barriers on American goods, including agricultural products, chemicals, medical devices, and manufactured items.
US Trade Representative Jamieson Greer said the agreement would give new opportunities for American employers and employees. “President Trump’s dealmaking is unlocking one of the largest economies in the world for American workers and producers,” Greer said in a statement. He added that the deal reduces tariffs on American industrial goods and increases access to American agricultural exports.
The United States would also eliminate tariffs on certain aircraft and aircraft components, easing India’s ability to purchase American aviation products. India also pledged to address the non-tariff barriers that have limited American food and farm exports. India will be awarded special tariff quotas for automobile parts and generic pharmaceutical products, and can then export some of the goods to the US on a more favorable footing.
Trade deal strengthens long-term US–India partnership
It’s not just tariffs or energy purchases that the deal encompasses. The two countries said they would double down on cooperation in advanced technology, from semiconductor chips used in data centers to digital infrastructure.
The investment and purchase commitments are not fully detailed. The $500 billion figure comprises both new arrangements and current projects to run over the next five years, officials said. The new investments were likely to be concentrated in energy, technology, and infrastructure, including data centers. The deal also underscores India’s growing significance as a global trade partner.
It follows shortly after India signed a major free-trade agreement with the European Union, a big free trade deal that will gradually allow it to knock many imports off the list to near zero. Other nations, including Canada, have since entered additional trade pacts as international trade practices and the tariffs of the Trump administration have changed drastically.
For the US, deepening trade relations with India is commercially and strategically advantageous. India is one of the world’s fastest-growing major economies and an important strategic partner in tech, defense, and energy.
Inspiring India to purchase American energy and reduce its dependence on Russian oil largely meets US geopolitical and economic objectives. In short, the elimination of the additional 25% tariff is a sea change in US–India trade.
Even though many details are pending, the pact indicates a genuine bid by both countries to expand their joint partnership and trade, and to build a long-term partnership.