Washington/New Delhi: In a major reset of Indo-US trade ties, Donald Trump and Narendra Modi on Monday unveiled a new bilateral trade agreement that slashes American reciprocal tariffs on Indian goods from 25% to 18%, with immediate effect.
The breakthrough followed a direct phone conversation between the two leaders, ending months of tariff standoffs and strategic friction.
Trump, announcing the decision on his Truth Social platform, said the deal was reached “out of friendship and respect” for Modi. He added that India has agreed to eliminate all tariffs and non-tariff barriers on US goods, opening its market fully to American exports.
“Effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced reciprocal tariff—lowering it from 25% to 18%,” Trump wrote.
Donald J. Trump Truth Social Post 11:58 AM EST 02.02.26
It was an Honor to speak with Prime Minister Modi, of India, this morning. He is one of my greatest friends and, a Powerful and Respected Leader of his Country. We spoke about many things, including Trade, and ending the…
— Commentary Donald J. Trump Posts From Truth Social (@TrumpDailyPosts) February 2, 2026
It’s good for India that this has happened after so much waiting. This was something India had been hoping for, and he (Trump) has reduced it from 25% to 18%—that’s the first victory: @rajchengappa speaks to @maryashakil @DcWalaDesi and @JournoPranay with further inputs. pic.twitter.com/Z0pMReeTiv
— IndiaToday (@IndiaToday) February 2, 2026
Energy, Ukraine and strategic alignment
In a significant geopolitical shift, Trump also revealed that India will halt purchases of Russian oil and instead ramp up energy imports from the US—linking the move to Washington’s efforts to end the Ukraine war.
The agreement reportedly extends beyond tariffs, with India expected to sharply increase imports of American energy, technology and agricultural products, signalling a deepening of economic ties.
Modi welcomes “people-first” partnership
Prime Minister Modi, responding on X, welcomed the announcement, calling it a win for Indian industry and consumers.
“Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%,” Modi said, thanking Trump on behalf of India’s 1.4 billion people.
He added that when the world’s two largest democracies work together, it unlocks “immense opportunities for mutually beneficial cooperation.”
From tariff war to trade thaw
The deal comes after months of tension triggered by Washington’s punitive levies on Indian exports—some linked to New Delhi’s continued purchase of Russian crude. Relations worsened in August, when steep penalties were imposed, sparking diplomatic and commercial strain.
The impasse began to ease in September as Trump expressed optimism about a resolution. Momentum gathered in December after both leaders reviewed progress in a phone call, discussing cooperation in critical technologies, energy, defence, security and trade.
In January, US Ambassador to India Sergio Gor indicated that negotiations were nearing completion—setting the stage for Monday’s announcement.
Strategic timing
The breakthrough coincides with External Affairs Minister S. Jaishankar’s visit to the US for a ministerial meeting on critical minerals, underlining the broader strategic context.
It also comes just a day after India presented its annual budget, which included measures to cushion the economy from the impact of earlier US tariff hikes.
With tariffs lowered, barriers dismantled and energy ties realigned, the deal marks a decisive shift from confrontation to cooperation—redefining the trajectory of Indo-US trade relations.
Prime Minister Narendra Modi thanked US President Donald Trump “on behalf of the 1.4 billion people of India” for reducing tariffs on Indian goods from 25 per cent to 18 per cent.
Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement.
When two large economies and the…
— Narendra Modi (@narendramodi) February 2, 2026
