India and the United States have announced a major diplomatic and economic breakthrough, concluding a trade deal that reduces U.S. tariffs on Indian goods to 18% from 25%, following a telephone discussion between Prime Minister Narendra Modi and U.S. President Donald Trump. The agreement comes after months of negotiations and elevated tariff tensions between the world’s two largest democracies.
In addition to the tariff reduction, the additional punitive 25% levy that had been imposed on Indian imports over New Delhi’s purchases of Russian oil has also been withdrawn, according to U.S. officials. Under the terms discussed during the call, the tariff revision is effective immediately, offering relief to Indian exporters.
The deal signals an improvement in bilateral trade relations, which had been strained by tariffs levied since 2025. The United States is one of India’s largest export markets, accounting for a significant share of merchandise exports. The revised tariff structure is expected to enhance India’s competitiveness, particularly relative to some regional rivals.
Negotiations toward a bilateral trade agreement (BTA) have been ongoing since early 2025, with both governments aiming to expand annual trade toward a $500 billion target by 2030 from current levels around $190 billion. In parallel developments, India recently concluded a trade agreement with the European Union, marking significant progress in its global trade engagements.
Markets reacted positively to the announcement, with Indian equities showing strength and the Indian rupee strengthening against the U.S. dollar. Exporters in sectors such as textiles, apparel, seafood, and engineering goods welcomed the deal, anticipating improved order flows and expansion opportunities in the U.S. market.
Both leaders used social media platforms to acknowledge the agreement. President Trump described the deal as reached “out of friendship and respect” for Prime Minister Modi, noting the mutual tariff concessions. Prime Minister Modi thanked President Trump, stating that reduced tariffs would benefit “Made in India” products and underscoring the positive implications for people across India.
