US president Donald Trump on Monday announced what he described as a major trade deal with India, claiming Washington will reduce tariffs on Indian goods to 18% from much higher levels that had strained bilateral trade over the past year. The announcement followed a phone conversation between president Trump and prime minister (PM) Narendra Modi and was made through the US president’s social media posts, even as formal details of the agreement remain absent. Indian stock market benchmark indices Sensex and Nifty surged in the early trading session on Tuesday after India and the US agreed to a trade deal. The 30-share BSE Sensex jumped 3,656.74 points to 85,323.20 in opening trade. The 50-share NSE Nifty surged 1,219.65 points to 26,308.05.
According to Mr Trump, the US will immediately lower the so-called reciprocal tariff on Indian exports from 25% to 18%, while also scrapping an additional 25% punitive duty imposed last year over India’s purchases of Russian crude oil. The combined levies had taken the effective tariff burden on Indian goods to 50%, placing India among the most heavily taxed US trading partners.
Prime minister Modi welcomed the announcement, saying reduced tariffs would benefit Indian manufacturers and exporters. “Wonderful to speak with my dear friend president Trump today. Delighted that Made in India products will now have a reduced tariff of 18%,” Mr Modi says, thanking the US president on behalf of India’s population and describing the move as a positive step when two large democracies work together.
President Trump, for his part, linked the tariff rollback to broader strategic and commercial commitments, asserting that India had agreed to lower its own trade barriers, scale back purchases of Russian oil and increase imports of US energy and other goods. He says the understanding was reached 'out of friendship and respect' for PM Modi and would take effect immediately.
A White House official later confirmed that the US is rescinding the Russia-related punitive duty that had been layered on top of the reciprocal tariff, signalling a clear de-escalation after months of pressure tactics. The tariffs had been imposed in August last year as Washington sought to discourage New Delhi from buying discounted Russian crude amid the Ukraine war.
Despite the sweeping claims, more than 12 hours after president Trump’s announcement neither government had released a joint statement, a negotiated text or an official fact-sheet spelling out the scope, timelines or legal basis of the deal. Publicly available information so far is largely limited to Mr Trump’s statements and brief clarifications from US officials.
Trade experts have urged caution. The Global Trade Research Initiative (GTRI) says the announcement appeared more like a political signal than a fully concluded agreement, noting that critical questions remain unanswered, including which products are covered and whether India has actually committed to eliminating tariffs and non-tariff barriers across sensitive sectors such as agriculture and regulated imports.
If implemented as described, the lower US tariff rate would significantly improve India’s competitive position. At 18%, India would face lower or comparable duties than most South Asian and Southeast Asian peers. Bangladesh, Sri Lanka, Taiwan and Vietnam face tariffs of 20%, while Pakistan, Indonesia, Malaysia, Thailand and the Philippines are subject to 19%. Cambodia is also at 19%. Only a handful of major economies, including the UK at 10% and economies such as Japan, South Korea and the European Union at 15%, enjoy lower rates under existing US trade arrangements.
The contrast is stark compared with countries still facing steep penalties. Brazil remains subject to tariffs of 50%, while Myanmar and Laos face 40%, South Africa 30% and Mexico 25%. Even developed economies such as Canada and Switzerland face significantly higher rates than India.
Among South Asian exporters, India’s revised tariff rate would undercut Bangladesh and Sri Lanka and sit only marginally above Afghanistan’s 15%, though Afghanistan’s export base is far smaller. Pakistan, a key regional competitor in textiles and select manufacturing segments, remains at 19%, giving Indian exporters a modest cost advantage in the US market.
Markets reacted positively to the news. US-listed shares of major Indian companies rose sharply, with IT companies and financial stocks leading gains and India-focused exchange-traded funds also moving higher. The rally reflected investor relief after months in which US tariffs had weighed heavily on Indian equities and triggered foreign investor outflows.
Back home, both the Sensex and the NIFTY, further extended their winning momentum. The BSE benchmark zoomed 4,205.27 points or 5.14% to 85,871.73. The Nifty jumped 1,252.8 points or 4.99% to 26,341.20.
President Trump also says India had committed to significantly increasing purchases of US goods, including energy, technology and agricultural products, putting the figure at more than US$500bn (billion). He suggested that India could source more oil from the US and potentially Venezuela, positioning the shift as part of a broader effort to cut off revenues to Russia. Modi’s public comments, however, did not refer to any commitment to halt Russian oil imports.
India, the world’s third-largest oil importer, relies on overseas supplies for about 90% of its needs. Cheaper Russian crude has helped cushion import costs since 2022, though recent data suggest New Delhi has begun to gradually reduce those purchases.
The claimed deal comes against the backdrop of months of tense negotiations and follows closely on India’s recently concluded trade agreement with the European Union, which is expected to eliminate or reduce tariffs on most goods by value, while excluding sensitive agricultural items.
For now, the absence of formal documentation has left businesses and policymakers waiting for clarity. Until official texts are released by Washington and New Delhi, questions will persist over how far the announced tariff cuts and market-opening commitments extend, and when exporters can expect them to take effect.
