President Donald Trump said on Monday, February 2, 2026, that the United States will reduce tariffs on Indian goods to 18% after Indian Prime Minister Narendra Modi agreed to halt purchases of Russian oil.
The announcement followed a call between the two leaders and marks the most significant shift in U.S.–India trade policy since last year’s tariff escalation.
According to the White House, the change includes removing a separate 25% punitive duty that Washington had layered on top of existing measures in 2025, while lowering the country-specific tariff rate from 25% to 18%. In parallel, India committed to expand purchases of American goods, with Trump saying New Delhi would buy more than $500 billion in U.S. energy, technology, agriculture, coal, and other products over time.
Modi publicly welcomed the tariff cut and framed the move as an opening for deeper commerce.
What the deal contains
The administration described three core elements. First, the U.S. will cut its country rate on Indian imports to 18 percent. Second, the extra 25 percent duty that had been imposed during last year’s dispute will be lifted.
Third, India has pledged to stop buying Russian crude and to shift additional volumes toward American suppliers, with the possibility of sourcing some barrels from other Western Hemisphere producers.
Trump also said India would move toward reducing its tariffs and non-tariff barriers on U.S. goods to zero. New Delhi has not published a detailed schedule for changes on its side, and officials in both capitals acknowledge that tariff lines, timelines, and product lists will need to be negotiated and, in many cases, legislated or notified through domestic procedures.
Why oil is at the center
India’s purchases of discounted Russian crude became a sticking point for Washington after 2022, when sanctions sought to limit Moscow’s energy revenue. The new U.S.–India understanding ties trade relief to an energy realignment. If India follows through and phases out Russian barrels, the shift would reweight flows toward the United States and potentially Venezuela, two suppliers Trump cited.
The practical mechanics, including wind-down periods for existing contracts and logistics for replacing volumes, have not been spelled out.
Energy analysts note that India’s refineries optimized for a mix that recently included significant Russian crude. Replacing those barrels at scale while maintaining refinery margins and fuel export economics will require careful sequencing. That is one reason market watchers expect any phase-out to be staged rather than immediate, even as the policy direction is clear.
The numbers behind the promise
Trump’s claim that India will purchase more than $500 billion in U.S. goods sets an ambitious marker. For context, U.S. goods exports to India in 2024 were about $41.5 billion and total two-way goods trade was roughly $129 billion, according to official trade statistics.
Scaling American sales by an order of magnitude would require a multiyear surge across energy, aircraft and parts, semiconductors and electronics, medical equipment, agriculture, and services tied to those shipments.
Trade lawyers add that tariff cuts on the U.S. side take effect through presidential proclamation or regulatory steps, but Indian tariff reductions and removals of non-tariff barriers typically flow through budget measures, customs notifications, and sector regulators. That implies a phased implementation, with early wins likely in sectors where both sides already have draft text.
How it affects businesses and consumers
For Indian exporters, the drop to 18% should ease pressure in categories that were hit hardest by last year’s increases, including textiles, apparel, certain machinery, and consumer goods. Importers in the United States could see lower landed costs on affected items once customs systems are updated, which can filter through to consumer prices if competition is strong.
For American firms, the promise of lower Indian barriers could open new lanes for agricultural commodities, medical devices, and high-value manufactured goods, provided New Delhi’s schedules deliver real market access.
Companies that plan around long-term contracts will watch the fine print. Rules of origin, product-specific quotas, safeguard clauses, technical standards, and dispute resolution determine whether headline tariff cuts translate into predictable access.
Firms with integrated supply chains will also evaluate how the energy component changes relative fuel and petrochemical pricing.
