US and India reach trade deal, Trump says after Modi call

February 2, 2026

US President Donald Trump and Indian Prime Minister Narendra Modi have reached a trade agreement that reduces US tariffs on Indian goods from 50% to 18%, while India has committed to eliminating its trade barriers entirely and ceasing purchases of Russian oil. The deal includes India's pledge to purchase over $500 billion in American products spanning energy, technology, agriculture, and coal sectors. This agreement follows recent US-imposed tariffs that severely damaged Indian exports and comes shortly after India finalized a separate major trade deal with the European Union.

Who is affected

US President Donald Trump and Indian Prime Minister Narendra Modi
1.4 billion people of India
Indian exporters whose sales to the US had plummeted under previous tariffs
US small businesses (represented by We Pay the Tariffs coalition of 800 businesses)
American importers
US stock markets and investors
The European Union and its 27 member states
Venezuela (as a potential oil supplier)

What action is being taken

The US is lowering tariffs on Indian goods from 50% to 18%
The White House is dropping Russian oil-linked tariffs as part of the agreement
India is reducing trade barriers and non-tariff barriers to zero
India is stopping purchases of Russian oil
India is committing to buy more than $500 billion worth of American goods
Officials in Delhi are seeking partnerships with other countries dealing with Trump's tariffs

Why it matters

This deal represents a significant shift in US-India trade relations after months of strain caused by the highest US tariffs imposed on any Asian country. The agreement strengthens the strategic partnership between the world's largest democracies and demonstrates India's willingness to align more closely with US interests by abandoning Russian oil purchases. The deal also serves as a US response to India's recent free trade agreement with the European Union, helping maintain American competitiveness in the Indian market. However, the significance is tempered by the fact that even the reduced 18% tariff rate remains substantially higher than pre-Trump tariff levels, representing a permanent cost increase for US importers and potentially affecting American consumers.

What's next

No explicit next steps stated in the article

Read full article from source: BBC