President Donald Trump announced on Monday that a trade agreement has been reached with India, resulting in a reduction of U.S. tariffs on Indian goods from 50% to 18%. In return, India will lower trade barriers, cease purchases of Russian oil, and instead consider buying oil from the U.S. and potentially Venezuela. The agreement was made following a discussion between Trump and Indian Prime Minister Narendra Modi.
As part of the deal, the U.S. will reduce the Reciprocal Tariff from 25% to 18%. Additionally, the U.S. will revoke a punitive 25% duty on all imports from India related to its purchases of Russian oil. Modi pledged to purchase over $500 billion worth of U.S. energy, technology, agricultural products, and other goods. Trump and Modi expressed mutual appreciation for the agreement.
India heavily relies on oil imports, with approximately 90% of its requirements covered by imports. The country had been purchasing cheaper Russian oil, but recent reports indicate a decline in these purchases. Indian markets have been negatively impacted by the imposed tariffs, leading to significant outflows of foreign investments.
In response to the trade deal, U.S.-listed shares of major Indian companies saw positive movement. Infosys, Wipro, HDFC Bank, and the iShares MSCI India exchange-traded fund experienced gains. Prime Minister Mark Carney is set to travel to India in the coming weeks to further enhance economic ties and explore the possibility of a Comprehensive Economic Partnership Agreement (CEPA).
The agreement marks a significant development following tense trade negotiations between the U.S. and India. Trump had previously increased duties on Indian imports to pressure the country to halt its purchases of Russian oil. The potential for India to buy Venezuelan oil presents an opportunity to substitute some of its Russian oil imports.