President Donald Trump announced a major trade agreement with Indian Prime Minister Narendra Modi that reduces American tariffs on Indian goods from 50% to 18% in exchange for India ending its purchases of Russian oil and eliminating trade barriers.
Key Terms of the US-India Agreement
The deal emerged from a morning phone call between Trump and Modi that covered trade relations and the Russia-Ukraine conflict. Trump confirmed on Truth Social that Modi agreed to stop buying Russian oil and instead purchase American oil, with potential purchases from Venezuela. India is also committed to buying more than $500 billion worth of American goods, including energy, technology, agricultural products, and coal. A White House official verified that Russian oil-linked tariffs will be dropped as part of the comprehensive agreement.
"It was an Honor to speak with Prime Minister Modi, of India, this morning… He agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela. This will help END THE WAR in Ukraine" – President Donald J. Trump 🇺🇸 pic.twitter.com/RD7PZ8S16z
— The White House (@WhiteHouse) February 2, 2026
Modi expressed enthusiasm for the arrangement, thanking Trump on behalf of India’s 1.4 billion citizens. The Indian leader emphasized that cooperation between two large economies and the world’s largest democracies creates mutual benefits and unlocks significant opportunities. The agreement addresses trade tensions that developed after the United States imposed 50% tariffs on Indian goods in August, the highest rate for any Asian country, including a 25% penalty specifically tied to India’s Russian oil purchases.
Market Response and Business Reactions
American stock markets rose following Trump’s announcement of the trade deal. However, the agreement drew criticism from We Pay the Tariffs, a coalition representing 800 small businesses across America. Director Dan Anthony argued that the 18% rate remains six times higher than the 2.5% average Americans paid on Indian goods before Trump’s tariff policies began. The organization characterized the deal as a permanent tax increase rather than genuine relief for American importers and consumers.
Strategic Context and Global Implications
The Washington-Delhi agreement comes one week after India secured a landmark free trade deal with the European Union following nearly twenty years of negotiations. European Commission President Ursula von der Leyen called that arrangement the “mother of all deals,” projecting it will double EU exports to India by 2032. Trade analyst Terry Haines of Pangaea Policy described the American-Indian agreement as a response to European competitive pressure, expecting American markets to welcome the development as the United States maintains its strategic position in global trade relationships.