“Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25 per cent to 18 per cent. They will likewise move forward to reduce their Tariffs and non-tariff barriers against the United States to zero,” Trump said in a post on Truth Social.
Prime Minister Narendra Modi, in a post on X, said: “Wonderful to speak with my dear friend President Trump today. 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.”
Trump said that India had agreed to stop buying Russian oil and buy much more from the US and potentially Venezuela, and agreed to purchase $500 billion worth of US energy, agriculture, coal and other products under the trade deal.
In the run-up to this outcome, there was a significant resetting of trade ties. India stepped up crude oil imports from the US, now nearly comprising 10 per cent of its total oil imports. New Delhi also signed a liquefied petroleum gas (LPG) deal where Indian public sector refiners have a one-year pact for American LPG imports. The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill, 2025, meanwhile, allows private players to enter the operations side of the tightly governed nuclear power sector, fulfilling key US demands.
PM’s visit to Washington, marking the start of negotiations
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Trump had repeatedly targeted India over its high tariffs, even before assuming office. Then Modi met him in February last year and announced the start of the negotiations for a bilateral trade agreement (BTA) by the end of the year. India thus was among the first countries to start negotiations with the US, but the trade deal comes after much of the world, including China.
The first sign of India addressing Trump’s concerns came even before Modi’s visit. As Trump consistently called India ‘tariff king’, talking about American companies such as Harley Davidson failing in India due to high tariffs, India slashed duty on more than two dozen items in the Union Budget. This included a reduction in tariff on motorcycles with an engine capacity above 1,600cc from 50 per cent to 30 per cent.
Just days before the PM’s visit, the government slashed duty on bourbon whisky to 50 per cent from 150 per cent. The US is the largest producer of bourbon whisky. However, the domestic industry protested against the duty cut, seeking a phased reduction over a period of 10 years rather than immediate steep cuts.
US targets high agri tariffs in India & GM regulation; sets 27% ‘reciprocal’ tariffs for the first time
Just days after releasing a report on non-tariff barriers that the US faces across the globe, including India, the US on April 3 announced 27 per cent ‘reciprocal’ tariffs on India. The United States Trade Representative (USTR) report on trade barriers criticised India’s high applied tariffs on a wide range of goods, including vegetable oils, apples, maize, motorcycles, automobiles, flowers, natural rubber, coffee, raisins, walnuts, and alcoholic beverages.
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The USTR report also flagged India’s regulations on the import of milk, pork, and fish products, stating that they require genetically modified (GM)-free certificates “without providing a scientific or risk-based justification.” It reiterated a long-standing American concern over India’s agricultural support programmes, which, according to the US, distort markets.
Even with a 27 per cent tariff, India did not seem to have fallen out of favour with the US, as Washington had set steeper tariffs on =Asian competitors. The figure was 54 per cent on China, 46 per cent on Vietnam, 37 per cent on Bangladesh, and 36 per cent on Thailand. Tariffs stood at 32 per cent on Indonesia and 48 per cent on Laos. However, the tariffs on India were higher than the 24 per cent duty on Japan and 25 per cent on South Korea. Duty on the EU stood at 20 per cent, while the UK faced a 10 per cent tariff.
India misses 90-pause window; deal takes political turn
As the US paused the implementation of the ‘liberation day’ tariffs for 90 days, it raised hopes that New Delhi would use the opportunity to strike a deal and begin attracting investments and export opportunities, moving away from China. However, this marked the beginning of fresh tensions between the two countries that eventually resulted in India facing the steepest tariffs on any country globally.
In response to a terrorist attack by Pakistan-based terrorist group “The Resistance Front” (TRF) in Pahalgam, India launched “Operation Sindoor” on May 7–8 , neutralising terrorist installations in Pakistan. Pakistan’s Director General of Military Operations (DGMO) called the Indian DGMO, and it was agreed between them that both sides would stop all firing and military action with effect from 1700 hours Indian Standard Time on May 10.
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However, the Trump administration claimed that the US used tariff leverage on both countries to stop the war. Later on May 23, US officials defended the use of emergency powers to impose sweeping tariffs in the US Court of International Trade, stating that withdrawal of Trump’s emergency tariff powers would disrupt trade deals the US is pursuing and jeopardise the ceasefire between India and Pakistan, court filings showed.
India-US ties worsen, US slaps 50% tariffs on India
Despite Trump’s multiple assertions that US tariff threat resulted in a ceasefire between India and Pakistan, New Delhi maintained that the ceasefire followed a call made by Pakistan’s DGMO to the Indian DGMO. While Pakistan nominated Trump for the Nobel Peace Prize, India refrained from any such gesture.
While the US continued to sign multiple trade deals, including with the EU, Japan and Vietnam, a deal with India remained elusive largely due to American demands related to agricultural market access. Ramping up pressure, Trump on August 7 doubled the tariffs on India to 50 per cent.
This widened differences between the two countries as the US cited India’s purchase of Russian oil for imposing additional tariffs. This was seen as discriminatory, as China was the largest buyer of Russian oil, at about 2 million barrels per day, followed by India (just under 2 million barrels a day) and Turkey. The US had agreed to lower tariffs on Chinese goods to 30 per cent from 145 per cent in May.
