From 50% to 18%: A new phase in India US Trade relations

A new lease of life has been injected into the strained relations between India and the United States over trade relations due to the dramatic decrease in the tariff rate that the United States has announced it will impose on India's exports, which has been cut to 18% from a whopping 50%.

For many years, India had suffered from one of the most harsh tariff rates imposed by USA, with the 50% duty attributed publicly to two main reasons: a 25% penalty for purchasing Russian oil and a 25% reciprocal tariff. The announcement came after the recent arrival of US Ambassador Sergio Gor in New Delhi last month, who seemed to have successfully turned the tables. Ambassador Gor had informed Indian authorities that US President Donald Trump had personally spoken to Indian Prime Minister Narendra Modi about the reduction of the tariff rates.

The first tangible evidence of the breakthrough was seen on Monday with Ambassador Gor’s post on X, confirming President Trump's conversation with Prime Minister Modi. Shortly after, President Trump took to his X account and mentioned that it was a "great honor" to talk with Prime Minister Modi, confirming the talk included discussions about various fields related to trade and the Ukraine-Russia conflict.

According to President Trump, the discussion involved an agreement from PM Modi to cease buying Russian oil and instead purchase from United States and potentially Venezuela. The US President also revealed that India agreed for trade deal with the United States wherein US would charge a zero tariff and non-tariff barrier. India would commit to a higher level of ‘BUY AMERICAN’ in addition to over 500 BILLION DOLLARS in areas of energy, technology, agriculture, coal, and many other products.

The high tariffs had previously put Indian exports in a difficult position in comparison to its competing countries. Having reduced its tariffs to 18%, India now is in a better position.

Until now, India has not officially announced its commitment to cease buying Russian oil. Records indicate an undeniable downward trend in Russian purchases is attributed to sanctions, market constraints, and unfavorable political costs, rather than a stated policy change. There has also been no official mention from the Indian side regarding the purchase of oil from Venezuela.

This reduction in reciprocal to tariff rates can broadly be seen as an important step towards a deeper economic and strategic partnership between the two nations. The announcement coincided with India’s External Affairs Minister S. Jaishankar embarking on a three-day US visit to attend a Washington-led ministerial meeting on the critical minerals supply chain.

The historic deal was celebrated across all major social media platforms with US President Donald Trump, Indian Prime Minister Narendra Modi, and Indian Union Home Minister Amit Shah posting on X and congratulating each other for a deal that is expected to take their strategic partnership to greater heights.