- US to cut tariffs on Indian goods from 50% to 18% under new trade deal with India
- US will drop 25% punitive duty on Indian imports linked to Russian oil
- India-EU deal reduces tariffs on 97% of EU exports, excluding some farm products
US President Donald Trump on Monday announced a new trade deal with India, which is set to cut US tariffs on Indian goods to 18%, down from 50%. In return, India has agreed to halt purchases of Russian oil and reduce trade barriers.
Trump shared the news on social media after speaking with Prime Minister Narendra Modi. He said India would instead buy oil from the United States and possibly Venezuela. A White House official said the US will drop a separate 25% punitive duty imposed over India's Russian oil imports. This had been added on top of an existing 25% reciprocal tariff.
The deal is expected to help Indian goods entering the US market as they were facing sweeping 50% since Aug. 27. That move will now be reversed under the deal.
Trump also said that PM Modi has committed to “buy American” at a much higher level. He claimed India would purchase more than $500 billion worth of US energy, technology, agriculture, coal and other products.
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On the deal, policy think tanks such as GTRI expressed optimism but said that more clarity is needed on which products are covered under the deal and when the changes will take effect.
How Is India-EU Deal Different?
The India-US trade deal comes days after India and the European Union announced their long-delayed deal. Under the new pact, India will reduce or remove tariffs on nearly 97% of EU exports. This includes major cuts on cars, alcoholic beverages and other industrial goods. Tariffs on EU cars will gradually fall to 10%. To be clear, these lower rates will apply to up to 2,50,000 cars a year priced above 15,000 euros. As soon as the agreement comes into force, car tariffs will drop to around 30% to 35%.
India will also sharply reduce duties on alcoholic drinks. Tariffs on wine will be cut immediately from 150% to 75%, and then gradually lowered to 20% over time. Tariffs on spirits will fall to 40%, according to the EU.
In return, the European Union will eliminate tariffs on 99.5% of Indian goods. This will give Indian exporters wider access to the EU market. The EU estimates the deal will save European companies around 4 billion euros in duties and could double EU exports to India by 2032.
India and the EU said that farm-related products have been excluded from the trade deal. These include soya, beef, sugar, rice and dairy items.
The EU–India talks dragged on for nearly two decades. However, they picked up speed after the United States imposed a 50% tariff on some Indian goods last year. Trump's proposal to take over Greenland further gave momentum to the deal.
Trade between India and the EU reached $136.5 billion in FY25. This was higher than India's trade with the US at $132 billion and China at $128 billion.
Track minute-by-minute updates on the latest developments from the India-US trade deal here.
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