Trump Cuts India Tariffs in Deal He Links to Russian Oil

By and

President Donald Trump said he will slash tariffs on India to 18% after Prime Minister Narendra Modi agreed to stop buying Russian oil, easing tensions between the two countries.

Get the Latest US Focused Energy News Delivered to You! It’s FREE:

Trump said Monday on social media that, following a phone call with Modi, he will lower his tariff on Indian goods from 25%, emphasizing that India buying less oil from Russia would help end the war in Ukraine. The US President is also removing the extra 25% duty on Indian goods he applied in response to India’s purchases of crude from Russia, according to officials familiar with the matter.

The president said that India will also “move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO” as well as purchase “over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products.”

Modi confirmed the pact, posting on social media that “Made in India products will now have a reduced tariff of 18%.” He didn’t mention oil purchases in his post.

India emerged as a key destination for discounted Russian crude after trade flows were upended by Moscow’s 2022 invasion of Ukraine. While the Trump Administration’s efforts to choke off Russia’s flows to India have so far slowed shipments, they have not completely halted.

In October, a similar announcement from Trump claimed Modi agreed to halt purchases of Russian oil but Indian refiners continued to buy crude from Moscow. Later the same month, the US imposed sanctions on Russia’s biggest oil producers, Rosneft PJSC and Lukoil PJSC, which led to appetite from India diminishing more significantly.

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)

India’s benchmark stock index Nifty 50’s futures traded at the Gujarat International Fin-Tec City surged as much as 3.8% in thin trading, while the US-listed iShares MSCI India ETF rose 3%. The rupee rallied in offshore trading, gaining 1% against the dollar.

The move announced by Trump will reduce the overall levies on many Indian goods to 18% from 50%, representing a significant reduction on textiles, machinery and other goods. The US president said India will also “move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO” as well as purchase “over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products.”

The new figures offer significant relief for New Delhi, which has sought for months to negotiate a lower rate with Washington. India ships almost a fifth of its total exports to the US and Trump’s tariffs of 50% amounted to the highest rate on products from any major trading partner.

The high tariff rate had impacted almost 55% of India’s exports to the American market and threatened to unravel its ambitions of becoming a manufacturing powerhouse.

“While devil is in the details, it removes a hanging sword over rupee, equity and rates market,” said Nilesh Shah, managing director at Kotak Mahindra AMC. “Let us hope that it is a win-win deal for both the countries as they have lot to gain through cooperation.”

It wasn’t immediately clear a deal was imminent before Trump and Modi’s phone call. US Trade Representative Jamieson Greer said last Tuesday that while India had “made a lot of progress” on curbing Russian oil buys but “they still have a ways to go on this point.”

Lengthy Talks

India was among the first to open trade talks with the Trump administration, but ties soured after the US president repeatedly claimed credit for a ceasefire between India and Pakistan, an assertion that rankled officials in New Delhi. The tariffs further strained relations.

Signs of a thaw between the two economies emerged after Trump called Modi on his birthday in September, ratcheting down tensions and seeing the countries resume stalled trade talks.

The US president in November said he could visit India next year at the urging of Modi.

The deal comes as tariffs weigh on India’s economy. The US is its biggest export market, and the new levies have hurt labor-intensive industries including textiles, leather, footwear, and jewelry. The latest trade figures show exports down nearly 12% in October from a year earlier, with the trade deficit hitting a record.

Still, India has taken steps to appease Trump. India’s oil minister said recently that state refiners had signed their first long-term deal to import American liquefied petroleum gas.

In his Truth Social post Monday, Trump said Modi had also agreed to potentially buy more oil from Venezuela. Indian Oil Corp., the country’s largest refiner, could add Venezuelan crude to its diet, an executive at the state-owned firm said last week. The company is looking to buy at least 24 million barrels of Brazilian crude this year and next as it continues to diversify supplies, the executive said.

Modi didn’t address Venezuelan oil purchases in his post.

— With assistance from Chiranjivi Chakraborty, Ravil Shirodkar, and Mia Gindis

(Adds Trump comment in third paragraph, updates with closing ETF price move in seventh.)