U.S. President Donald Trump and Indian PM Narendra Modi during the former’s 2020 visit. File Photo

Following on the heels of progress in the India–European Union Free Trade Agreement (FTA), India has announced a new trade deal with the United States that will reduce reciprocal tariffs to 18% from the present 25%. The move is being seen as a significant step in strengthening bilateral trade ties between the two countries and improving market access for Indian exports.

Modi announces tariff cut after call with Trump

Taking to his X (formerly Twitter) account, Prime Minister Narendra Modi confirmed the development after speaking with US President Donald Trump and welcomed the tariff reduction for Indian products. He wrote:

" Wonderful to speak with my dear friend President (Donald)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. When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation. President Trump’s leadership is vital for global peace, stability, and prosperity. India fully supports his efforts for peace. I look forward to working closely with him to take our partnership to unprecedented heights."

The announcement places the tariff decision within the broader context of strategic and economic cooperation between the two democracies.

Trump statement adds trade and energy dimensions

Meanwhile, US President Donald Trump, in a statement on Truth Social, said it was an honour to speak with Prime Minister Narendra Modi, describing him as a close friend and a powerful, respected leader. He said their conversation covered multiple issues, including bilateral trade and efforts to end the Russia–Ukraine war.

Trump added that Modi agreed India would stop purchasing Russian oil and would increase energy purchases from the United States, and potentially from Venezuela. He further stated that such steps would help advance efforts to end the war in Ukraine, where thousands are dying each week.

He also said that, at Modi’s request and as a gesture of friendship and respect, the two sides agreed to a trade deal under which the United States would immediately lower its reciprocal tariff on Indian goods from 25% to 18%, while India would move to reduce its tariffs and non-tariff barriers on US goods to zero.

India, however, is yet to comment on its position regarding purchases of Russian oil, and no official clarification has been issued on this aspect of the US statement so far.

Reactions follow from government and industry

Following the announcement, reactions began to emerge from government and industry leaders, who described the agreement as a milestone in India–US economic relations.

Piyush Goyal, India’s Minister of Commerce and Industry, stated on his X account: " Congratulations to Prime Minister @NarendraModi ji and President @RealDonaldTrump, as well as to the people of India and the United States, on the landmark trade agreement. This reflects the power of two like-minded, fair-trading democracies working together for shared prosperity. Grateful to PM @NarendraModi ji and President @realDonaldTrump for their visionary and decisive leadership, and strong commitment to strengthening India–U.S. ties. This unlocks the power of two large democracies working together for the shared prosperity of their people. Both India and the US are natural allies, and our partnership will co-create technologies, co-develop solutions, and work together for peace, growth, and a brighter future for India and the US. This agreement unlocks unprecedented opportunities for farmers, MSMEs, entrepreneurs, and skilled workers to Make in India for the world, Design in India for the world, and Innovate in India for the world. It will help India get technology from the US. It is not just a trade deal - it is a historic turning point that will reshape India–U.S. relations and accelerate our journey towards Viksit Bharat 2047. "

Electronics sector sees competitive advantage

Industry bodies also welcomed the tariff revision, particularly those representing export-oriented manufacturing sectors.

Pankaj Mohindroo, Chairman, ICEA, said the outcome strengthens India’s competitive position among global manufacturing peers.

“This is a positive and competitive outcome for India. At the agreed 18% rate, India remains well placed relative to key manufacturing peers and retains its attractiveness as a global manufacturing and export hub. While we await the finer details of the deal, the direction clearly supports India’s strategy of scaling manufacturing and integrating deeper into US-led global value chains, particularly in electronics.

This outcome reflects the steady leadership of the Prime Minister, the Commerce and Industry Minister, and the Commerce Secretary, who have navigated complex negotiations with clarity and finesse. We see strong potential for expanded technology collaboration and envision electronics trade reaching USD 100 billion within the broader USD 500 billion India–U.S. trade ambition.”