India and the US announced on Monday that they had agreed on a trade deal. India has announced it will face US tariffs of 18%, up from 50%. The US, meanwhile, said India had agreed to stop buying Russian oil, move to zero tariffs on a wide range of US products and remove non-tariff barriers, buy $500 billion worth of US products and allow better access to its agricultural sector.
India has not yet confirmed these aspects of the trade deal. Remember that the US demand for better access to the Indian agricultural market was a sticking point. While a better assessment will be possible once the finer details of the trade deal are released, on the face of it, the 18% tariff for India puts it on a level playing field with other export competitors, if not at an outright advantage.
The 50% tariff, which came into force in late August, dealt a severe blow to several sectors, although overall exports showed resilience by occupying alternative markets. Gems and jewellery, textiles and marine products are among the goods expected to receive much-needed relief from lower duties.
The announcement of the trade deal comes after nearly a year of dramatic events that have disrupted India’s trade and diplomatic relations with the US. While India faced reciprocal tariffs along with several other countries in April 2025, negotiations stalled as New Delhi hesitated to open its agricultural market to US products. Tensions escalated further when the Indian government countered President Donald Trump’s claims about his role in ending the India-Pakistan conflict. The situation worsened in late August, when an additional 25% tariff was imposed, making the country, along with Brazil, the hardest hit by US tariffs. The trade deal was essential to keep India’s biggest export market from slipping.
Trump also claimed on Monday that India had agreed to stop buying Russian oil. Energy imports played a central role in escalating tensions between the two nations. Since the Russo-Ukraine war, India has been buying Russian oil at subsidized prices. However, India has been curbing these imports for the past year as discounts on Russian oil narrow.
Russia’s share of India’s oil imports has risen sharply from less than 2% before 2022 to around 35% in 2024-25, making it India’s largest oil supplier. However, Russian oil’s share has fallen to 32% so far in FY26. India became the third largest buyer of Russian oil in December, falling from second place.
In contrast, the US accounted for only 5% of India’s oil imports by 2024-25, but its share has so far increased to over 8% by 2025-26, making it the fourth largest source. The August 2025 sanctions were explicitly tied to these purchases of Russian oil, demonstrating how trade measures were used as leverage in broader geopolitical negotiations.
It is unclear what Trump meant when he said India would buy $500 billion worth of US goods and over what period. For context, bilateral trade between India and the US totaled $132 billion in FY25, with imports from the US accounting for about $43 billion.
” (Agreement) brings India broadly in line with its Asian counterparts on tariff rates – at the very least removing the earlier unfair and disproportionate drag on exports and by extension the rupee,” said Madhavi Arora, chief economist at Emkay Global Financial Services.
