Trump Slashes India Tariff to 18% After Agreement with Modi

US President Donald Trump has agreed to a trade deal with Prime Minister Narendra Modi that will see tariffs on Indian goods drop to 18% from its previous 50% threshold.

The deal was made during a call between the two leaders in which Modi agreed to lower tax barriers against the US, and to stop buying oil from Russia, and instead source the commodity from the US, and possibly Venezuela. In return, Trump will drop its 25% punitive levy against India.

“[Modi] agreed to stop buying Russian oil, and to buy much more from the US and, potentially, Venezuela,” Trump said in a post on Truth Social Monday. “This will help end the war in Ukraine. Our of friendship and respect for Prime Minister Modi, and as per his request, effective immediately, we agreed to a trade deal…whereby the US will charge a reduced reciprocal tariff, lowering it from 25% to 18%. They will likewise move forward to reduce their tariffs and non-tariff barriers against the US to zero.”

In addition, India will buy more American products, including over $500 billion in US energy, technology, agriculture and coal.

The date on which the tariff reduction will begin was not disclosed. The parties also did not provide a full workup of how it will be implemented.

The news is the second big win for India in just under a week after the EU agreed to abolish tariffs on jewelry imports from the country as well as cut tax on polished imports. It also heralds hope for the diamond industry, which was in turmoil following the initial tariff announcement, given India manufactures 90% of the world’s rough diamonds. The industry is awaiting clarification to determine whether diamonds and jewelry exports will benefit from the new 18% tariff.

“GJEPC is optimistic that based on India signing the trade deal, loose diamonds and colored gemstones from India will get the benefit of 0% duty imports in the US, via Annex 3 of the US reciprocal tariff list, providing much-needed support for diamond exports,” Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council (GJEPC) said Tuesday. “This will enhance trade flows, rebuild confidence, and deliver a sector-wide boost.”

Modi publicly welcomed the tariff reduction on X, while expressing confidence in deeper economic ties between India and the US.

However, the Indian trade is not as optimistic as would be expected.

“For me, it’s still a big number,” Senil Lakhani, president of Kiran Gems USA, told Rapaport News. “18% in our industry is still not sustainable. But, we will see…if it goes to 0% or 5% or at least 10%, we will see a major shift in the market.”

Image: The US and Indian flags. (Shutterstock)