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Modi-Trump Trade Pact: US Cuts Tariffs to 18% as India Pivots from Russian Oil
Summary: A seismic shift in global trade has occurred as PM Narendra Modi and US President Donald Trump finalized a landmark deal. The US has reduced tariffs on Indian goods to 18%, while India has committed to a massive $500 billion "Buy American" plan and a strategic exit from Russian oil imports.
New Delhi | Washington DC: In a move that has sent shockwaves through global markets, Prime Minister Shri Narendra Modi and US President Mr. Donald Trump have sealed a historic trade agreement, effectively ending a period of intense tariff friction.
Following a high-stakes 30-minute phone call on Monday, February 2, 2026, President Trump announced that the US would cuts its reciprocal tariffs on Indian products from a punitive 50% (including the Russian oil penalty) down to a uniform 18%.
The "Buy American" Pivot: Inside the Deal
According to President Trump’s announcement on Truth Social, the deal hinges on a massive economic pivot by New Delhi. Key pillars of the agreement include:
- Tariff Reduction: US reciprocal tariffs are capped at 18%, lower than those for China (35%), Pakistan (19%), and Vietnam (20%).
- Zero-Tariff Access: India will work toward reducing its own tariffs and non-tariff barriers on US goods to ZERO.
- The $500 Billion Commitment: India has pledged to purchase over $500 billion in American energy, technology, coal, and agricultural products.
- Russian Oil Exit: In a major geopolitical shift, India has agreed to stop purchasing Russian crude, moving its energy procurement to the US and potentially Venezuela.
PM Modi: "A Win for 1.4 Billion Indians"
PM Modi hailed the announcement on X, expressing gratitude to his "dear friend" President Trump. He emphasized that the lower tariff is a massive shot in the arm for the 'Made in India' initiative.
"Delighted that Made in India products will now have a reduced tariff of 18%. This cooperation benefits our people and unlocks immense opportunities," PM Modi shared.
Why This Matters: The Jaishankar Factor
The deal was finalized just as External Affairs Minister Dr.S. Jaishankar arrived in Washington DC for the Critical Minerals Ministerial. The timing suggests a coordinated effort to stabilize the Indo-Pacific economy and align India more closely with Western supply chains.
Frequently Asked Questions (FAQs)
Q1: Why were US tariffs on India so high previously?
Before this deal, tariffs had surged to 50% as the US imposed a 25% "penal tariff" specifically targeting India’s purchase of Russian oil.
Q2: Is the 18% tariff effective immediately?
Q2: Is the 18% tariff effective immediately?
Yes, President Trump stated the reduction is effective immediately, though technical paperwork is being finalized by US Ambassador Sergio Gor.
Q3: Which sectors will benefit the most?
Q3: Which sectors will benefit the most?
Indian MSMEs, textile exporters, engineering firms, and the tech sector will see immediate relief as their products become more competitive than those from China or Vietnam.
#ModiTrumpTradeDeal#IndiaUSRelations2026#MadeInIndia
#ModiTrumpTradeDeal#IndiaUSRelations2026#MadeInIndia
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