Donald Trump announced a trade deal with India to reduce tariffs

The President of the United States, Donald Trump, announced this Monday a trade agreement with India after a telephone conversation with the Indian Prime Minister, Narendra Modi. According to Trump on the Truth Social platform, the agreement implies the reduction of US tariffs on Indian products from 25% to 18%, as well as India’s commitment to stop buying oil from Russia and increase its energy imports from the United States and, potentially, from Venezuela. Trump stated that this shift in Indian energy import policy “will help end the war in Ukraine”, alluding to Washington’s efforts to get New Delhi to distance itself from Russian crude oil, which it has acquired at reduced prices since the Russian invasion of Ukraine in February 2022. The US administration had been pressuring for months for India to abandon its dependence on Russian oil, establishing secondary tariffs of 25% as a pressure measure. The Republican leader explained that, “out of friendship and respect” towards Modi, and “at his request,” the United States immediately implements the new tariff scheme. In return, Modi’s government pledged to reduce to zero tariff barriers and non-tariff barriers for American products and to increase its imports of goods and services from the United States in sectors such as energy, technology, agriculture, and coal, for a value exceeding 500 billion dollars.

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Trump emphasized that the bilateral relationship will be further strengthened from this agreement. In addition, he stressed that India will begin to buy crude oil from Venezuela, after the Venezuelan oil sector was liberalized following the capture of Nicolás Maduro by the United States on January 3rd. The US president had already anticipated on Saturday that the energy agreement with Venezuela would allow India to stop acquiring Iranian crude, thus diversifying its sources of supply. Modi posted on X that he was “delighted” with the announced tariff reduction and that Trump’s leadership is vital for global peace, stability, and prosperity. “I look forward to working closely with him to take our collaboration to an unprecedented level,” Modi declared. The decision had an immediate impact on financial markets. The Indian stock market index Nifty 50 recorded a rise of up to 3.8% in operations in the city of Gujarat, while the US fund iShares MSCI India ETF rose 2.4%. The Indian rupee appreciated 1% against the dollar in the offshore market. Historically, the relationship between India and Russia had focused more on military cooperation than on energy, although after the Russian invasion of Ukraine, New Delhi increased its purchase of Russian oil at discounted prices. With the new agreement, India is expected to begin progressively reducing those purchases.

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Trump praised Modi as one of his “best friends and a powerful and respected leader in his country.” The Friday before the announcement, Modi had a phone conversation with the acting president of Venezuela, Delcy Rodríguez, in which they both agreed to deepen energy cooperation between both countries.