Prime Minister Narendra Modi has expressed profound gratitude to US President Donald Trump for slashing tariffs on Indian goods from 25 per cent to 18 per cent. In a heartfelt post on X, Modi thanked Trump "on behalf of the 1.4 billion people of India," hailing the move as a boon for "Made in India" products.

The announcement came swiftly after Trump revealed the tariff cut on his Truth Social platform, framing it as a "trade deal." Modi, who spoke directly with Trump earlier that day, described their conversation as "wonderful" and praised the US president as a "dear friend."

This reduction signals a thaw in trade tensions between the two largest democracies. Modi emphasised that collaboration between such vast economies unlocks "immense opportunities for mutually beneficial cooperation," benefiting citizens on both sides.

Trump reciprocated the warmth, calling Modi "one of my greatest friends, and a powerful and respected leader of his country." The gesture underscores personal rapport driving policy shifts amid global economic pressures.

The US-India Strategic Partnership Forum (USISPF) welcomed the step as "important and positive." It views the 18 per cent reciprocal tariff as a foundation for a comprehensive bilateral trade agreement tackling tariffs, market access, non-tariff barriers, and sector-specific issues.

Details of the agreement remain pending, yet the political will is evident. This could pave the way for deeper integration in manufacturing, technology, and services, aligning with India's push for indigenous production.

The backstory traces to escalating tariffs under Trump's "America First" agenda. On 2 April 2025, the US imposed a 26 per cent "reciprocal tariff" on key Indian imports as part of global "liberation day" measures.

Tensions rose on 10 April 2025, when Trump paused those tariffs for 90 days but retained a 10 per cent baseline duty on all imports. By 31 July 2025, he escalated to a blanket 25 per cent tariff on Indian goods, linking it to penalties over India's Russian oil purchases.

The peak came on 7 August 2025, with tariffs surging to 50 per cent—the highest among US partners—explicitly citing India's continued oil imports from Russia amid the Ukraine conflict.

India faced significant headwinds, with exports like pharmaceuticals, textiles, and electronics hit hard. The 50 per cent rate disrupted supply chains, raising costs for US consumers and straining bilateral ties.

Diplomatic backchannels persisted through 2025, blending economic negotiations with strategic dialogues on Indo-Pacific security and defence cooperation. Modi's outreach, including high-level visits, helped temper the rhetoric.

By early 2026, shifting geopolitics— including Russia's oil dynamics and US election cycles—created space for de-escalation. Trump's 2 February announcement marks a pragmatic pivot, rewarding India's strategic alignment.

For Indian exporters, the drop to 18 per cent offers immediate relief. Sectors like gems, jewellery, auto components, and IT hardware stand to gain, potentially boosting shipments by 10-15 per cent in the short term.

This aligns with India's Atmanirbhar Bharat initiative, encouraging "Made in India" competitiveness in the US market. It could spur investments in joint ventures, especially in semiconductors and green energy.

Broader implications extend to global trade. The deal may pressure other nations to negotiate, while reinforcing US-India counterweights to China in supply chains. Challenges linger, including US demands on intellectual property and agricultural access. Non-tariff barriers, such as regulatory approvals, must still be resolved for a full pact.

Modi lauded Trump's "leadership" for global peace and prosperity, with India pledging support for his peace efforts. This nods to shared priorities like counter-terrorism and regional stability.

Looking ahead, both leaders aim to elevate ties to "unprecedented heights." Upcoming summits could finalise the trade framework, integrating defence pacts like QUAD and iCET.

In defence and aerospace—key to India's expertise—this tariff relief enhances procurement and tech transfers. Reduced duties on components could accelerate indigenous manufacturing at firms like HAL and TATA Advanced Systems.

Economists project the deal could add $20-30 billion to bilateral trade over five years, fostering jobs and innovation. Yet, vigilance on oil geopolitics remains crucial to avoid reversals.

Ultimately, this episode exemplifies how personal diplomacy and mutual interests can navigate trade wars, setting a template for resilient partnerships.

Agencies