After extensive negotiations and widespread anticipation, India and the United States have successfully concluded a significant trade agreement. The breakthrough was announced by US President Donald Trump via social media on Monday, with Prime Minister Narendra Modi and key Indian ministers expressing their approval of the newly forged pact.
Key Components of the India-US Trade Agreement
President Trump outlined several critical elements of the deal in his announcement. According to his statements, the agreement encompasses multiple strategic commitments from both nations aimed at enhancing bilateral trade relations.
Major Points Announced by President Trump
The US President highlighted five primary aspects of the trade deal during his announcement:
- Prime Minister Modi has agreed to halt purchases of Russian oil as part of the agreement.
- India has committed to increasing its procurement from the United States, with potential additional purchases from Venezuela also mentioned.
- The United States will implement a reduced Reciprocal Tariff, decreasing it from 25% to 18%.
- India will take steps to eliminate its tariffs and non-tariff barriers against US products, aiming to reduce them to zero.
- Prime Minister Modi has pledged to 'BUY AMERICAN' at significantly higher levels, with India committing to purchase over $500 billion worth of US energy, technology, agricultural products, coal, and various other goods.
Next Steps in Implementation
With the agreement in principle established, both governments will now focus on formalizing the tariff changes through official documentation. Sources familiar with the negotiations have indicated that while overall tariffs on Indian goods have been reduced from 50% to 18%, specific details regarding tariff lines and Section 232 tariffs will be clarified in the coming period.
It is important to note that certain items falling under Section 232 categories may continue to face tariffs. These include automobiles, steel, aluminum, timber, copper, trucks, and ships. The Section 232 tariffs have a complex history, with President Trump having issued multiple proclamations since February 10, 2025, to expand and increase tariffs on steel and aluminum imports and their derivative products.
Subsequently, a proclamation was issued increasing Section 232 tariffs on subject steel and aluminum imports to 50% for all countries except the United Kingdom, which maintained a 25% rate. This increase took effect on June 4, 2025. Like other nations, India has significant exposure to sectors covered by Section 232 tariffs. Available data suggests that approximately one-tenth of India's exports, valued at over $8 billion, may still encounter higher tariffs despite the new agreement.
Indian Leadership's Response
Prime Minister Narendra Modi has warmly welcomed the India-US trade deal, confirming the tariff reduction announced by President Trump. However, he has not explicitly confirmed other aspects of Trump's announcement, such as India's decision to cease purchasing Russian oil or the specific commitment to buy American products as outlined in the deal.
In a social media post, PM Modi stated, "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."
External Affairs Minister S. Jaishankar also expressed his support for the agreement, noting, "Welcome the announcements on bilateral trade following the conversation between PM Modi and President Trump. This will create more jobs, spur growth and promote innovation in both economies. It will strengthen 'Make in India' endeavors and encourage trusted technology ties. The opportunities in our economic engagement are truly vast and we are confident of realizing them." He further emphasized that "A robust economic relationship is the strongest foundation for our strategic partnership."
Union Minister Nitin Gadkari praised both Prime Minister Modi and President Trump for announcing the India-United States trade deal. He stated that this agreement will significantly strengthen trust between the two countries and boost confidence in business, trade, and investment activities.
