India and US Forge Landmark Trade Agreement with Significant Tariff Reductions
In a significant development aimed at easing months of trade tensions, India and the United States announced a bilateral trade deal on Monday. This agreement will see Washington slash additional tariffs on Indian imports to 18%, a substantial reduction from the current 50% rate. This move is expected to enhance competitiveness for key Indian export sectors, including textiles, leather, and seafood, providing a much-needed boost to these industries.
Modi and Trump Exchange Praise Amidst Trade Announcements
Following US President Donald Trump's announcement on Truth Social, Prime Minister Narendra Modi took to X to express his gratitude. In his post, PM Modi described his conversation with Trump as wonderful and thanked the US President on behalf of India's 1.4 billion people for reducing tariffs on Indian goods to 18%. However, notably, Modi's message did not explicitly mention the trade deal itself, focusing instead on the tariff reduction.
The Prime Minister also refrained from commenting on Trump's claim that during their discussion, Modi agreed to halt purchases of Russian oil and instead increase energy imports from the US, potentially including Venezuela. Trump asserted that this shift would involve buying $500 billion worth of energy, technology, and farm products from the US, a step he believes could help end the war in Ukraine.
Key Details of the Trade Agreement and Its Implications
According to President Trump, PM Modi further agreed to eliminate tariff and non-tariff barriers against the US, bringing them down to zero. A spokesperson from the US embassy confirmed that the final tariff on Indian goods now stands at 18%, down from the previous 50%. This arrangement positions India more favorably compared to other nations like Vietnam, Bangladesh, Indonesia, South Korea, and China, which continue to face higher tariffs.
The timing of the Trump-Modi conversation coincided with External Affairs Minister S. Jaishankar's visit to the US for a critical minerals ministerial meeting, chaired by Secretary of State Marco Rubio this week. This deal follows closely on the heels of India and the European Union announcing the completion of talks for a comprehensive trade agreement just six days prior.
Political Reactions and Global Context
The trade deal has sparked varied reactions, including sharp comments from some members of the Trump administration, with criticisms directed at the EU. In his X post, PM Modi emphasized the benefits of collaboration between two large economies and the world's largest democracies, stating it unlocks immense opportunities for mutually beneficial cooperation. He praised Trump's leadership as vital for global peace, stability, and prosperity, affirming India's full support for peace efforts and expressing eagerness to work closely with Trump to elevate the partnership to new heights.
Beyond reciprocal tariff adjustments, Trump announced an additional 25% tariff on India for its purchases of Russian oil. He attributed the US's agreement to the trade deal to friendship and respect for Modi, made at the latter's request. Trump highlighted the strong relationship between the two nations, asserting that he and Modi are leaders who get things done, unlike many others.
Broader Discussions and Symbolic Gestures
In his social media posts, Trump described Modi as one of his greatest friends and a powerful, respected leader. He detailed their conversation, covering trade and efforts to end the war in Ukraine, reiterating Modi's alleged commitment to stop buying Russian oil and increase US energy imports. Trump claimed this could help end the ongoing conflict, which has resulted in significant casualties weekly.
This announcement comes after India hinted last week, following the EU FTA negotiations, that a trade agreement with the US might be imminent, with discussions ongoing since February of the previous year. Prior to disclosing the trade deal, Trump shared two India-related posts, including one featuring him and Modi on a magazine cover labeled "The Mover and the Shaker," and another showcasing New Delhi's India Gate, which he praised as "India's beautiful Triumphal Arch," drawing parallels to a monument he plans in Washington DC.
While the US has acknowledged India's reduction in Russian oil purchases in recent months, it had not previously eliminated the additional tariff. This new deal marks a pivotal step in strengthening bilateral ties, with both leaders optimistic about future cooperation and its impact on global trade dynamics.
