New Delhi: The US will cut all tariffs on Indian export goods from the present 50 percent to 18 percent following the call between Prime Minister Narendra Modi and President Donald J. Trump Monday.
A US Embassy spokesperson in New Delhi confirmed that the “final tariff rate will be 18 percent” on Indian merchandise exports. The previous tariffs on Indian goods stood at 50 per cent, that included a 25 percent “reciprocal tariff” and a 25 percent “penalty tariff” on account of India’s purchase of Russian oil.
The US administration has been indicating in the last few weeks that it is looking at removing the penalty tariffs on Indian merchandise exports due to the dip in Russian oil purchases by New Delhi. The penalty tariff was first imposed at the end of August 2025.
Russian oil imports took a considerable dip following the sanctioning of Rosneft and Lukoil by Washington in October 2025.
Modi announced the reduction in tariffs as the key takeaway from the call with Trump earlier Monday evening, with no mention of a “trade deal”.
The US President, on the other hand, asserted that the two sides have concluded a trade deal that will see India cut all tariffs on American imports to zero and increase purchases of US energy, agricultural, technology, coal and “many other products” to the tune of $500 billion.
Tariff rates imposed on India by the US are now lower than its South Asian neighbours. Pakistan had agreed to a trade deal with the US last year that saw its reciprocal tariff rates at 19 percent, while Bangladesh is currently tariffed at 20 percent. Vietnam, another country in Southeast Asia that has grown to compete in the global textiles market against Indian goods, also faces a tariff rate of 20 percent.
US Ambassador Sergio Gor, in interviews with Indian media late Monday evening said the two sides are set to sign an agreement in the next few days, and that the two leaders may meet soon.
The contours of any agreement are still unclear with no official comment from the Indian government on whether New Delhi will purchase more American agricultural products and reduce all tariffs to zero.
Trump also announced that India will stop all purchases of Russian oil and will look to purchase Venezuelan oil instead. India has long maintained that its energy purchases will be dictated by the prevailing market conditions and not by pressures by a third country. India’s merchandise imports from the US have increased in the last few months as reported by ThePrint.
Agriculture and dairy have been two sectors that are considered “red-lines” for New Delhi. The recently concluded negotiations for a free trade agreement with the European Union (EU), which EU Commission President Ursula von der Leyen called the ‘mother of all deals’ did not include sensitive agricultural goods and dairy.
The EU conceded that certain sectors will not be a part of the deal, while gaining in other areas including in wines, spirits and automobiles. India and the US’ trade negotiations have stalled for months partly because of the differences between the two countries on agricultural and dairy products.
Therefore, if the contours announced by Trump are confirmed by the Indian side, it would mark a major shift in the government’s trade policy.
The US is India’s largest export market, accounting for roughly $86 billion worth of exports in FY2024-25.
India has consistently maintained a trade surplus with the US in the range of around $30 to $40 billion in the last few years. Russia still remains India’s largest source of energy in the ongoing financial year.
(Edited by Amrtansh Arora)
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