The United States and India have forged a landmark trade agreement that dramatically reduces American tariffs on Indian imports from 50 per cent to 18 per cent. President Donald Trump announced the deal on social media following a telephone conversation with Prime Minister Narendra Modi.

This move rescinds a punitive 25 per cent duty imposed on Indian goods due to New Delhi's purchases of Russian oil, which had been added atop a 25 per cent reciprocal tariff.

In exchange, India has pledged to halt its imports of Russian oil and lower its own trade barriers against US goods, potentially driving them to zero.

Prime Minister Modi hailed the agreement, stating that "Made in India products will now have a reduced tariff of 18 per cent". He expressed delight on behalf of India's 1.4 billion people, thanking President Trump for unlocking opportunities in two of the world's largest democracies.

Trump emphasised India's commitment to "BUY AMERICAN at a much higher level", including over $500 billion in US energy such as coal, alongside technology, agricultural products, and more. India may also source oil from the US and potentially Venezuela. This pact positions India favourably amid Trump's broader tariff strategy, which has raised duties on many nations to double-digit levels since his return to office.

Compared to other major Asian economies, India's new 18 per cent rate offers a clear edge. China faces 37 per cent tariffs, while Pakistan endures 19 per cent, and Bangladesh 20 per cent. Southeast Asian peers like Vietnam (20 per cent), Malaysia (19 per cent), Cambodia (19 per cent), and Thailand (19 per cent) also confront higher barriers. Indonesia similarly lags behind India's improved access.

Further afield, nations like Brazil (50 per cent), Myanmar (40 per cent), Laos (40 per cent), and South Africa (30 per cent) bear the heaviest US duties. In contrast, India's rate remains slightly above those of close US allies: the United Kingdom (10 per cent), the European Union (15 per cent), Switzerland (15 per cent), Japan (15 per cent), and South Korea (15 per cent).

Historically, India maintained some of the world's highest tariffs before Trump's policy shifts, with a simple applied rate of 15.6 per cent and an effective rate of 8.2 per cent per World Trade Organisation data. The deal reverses this dynamic, spurring "Make in India" initiatives and fostering mutual growth, as Modi noted.

External Affairs Minister S. Jaishankar described the pact as a boost for indigenous manufacturing and economic expansion. Commerce Minister Piyush Goyal echoed this, highlighting vast opportunities for Indian farmers and exporters in the US market.

Yet key details remain opaque. Trump's announcement omitted the implementation start date, deadlines for ending Russian oil imports, specifics on barrier reductions, and the exact US products India must procure. No presidential proclamation or Federal Register notice has formalised the changes as of late Monday.

Neither the White House nor New Delhi has released comprehensive terms or an effective date. Russia has offered no comment on India's purported oil halt. Previous US deals with Japan and South Korea involved massive investments in American industries—hundreds of billions of dollars—but this agreement mentions none.

The pact emerges against a backdrop of geopolitical tensions, with Trump's tariffs punishing nations seen as unfair traders or overly reliant on adversarial suppliers like Russia. For India, it signals deepening strategic ties with the US, potentially reshaping South Asian trade dynamics and diminishing rivals' competitiveness in key sectors like textiles, pharmaceuticals, and electronics.

Analysts anticipate ripple effects on global supply chains, as lower US duties could accelerate India's shift from Russian energy dependence towards American alternatives. This aligns with broader Indo-US convergence on countering Chinese influence in Asia.

While uncertainties persist, the deal underscores a pragmatic pivot: India gains market access advantages over China, Pakistan, Bangladesh, and others, bolstering its export-driven growth at a pivotal moment in global trade.

Agencies