By Manoj Kumar
NEW DELHI, Feb 3 (Reuters) - U.S. President Donald Trump announced a trade deal with India that slashes U.S. tariffs on Indian goods to 18% from 50% in exchange for India halting Russian
oil purchases and lowering trade barriers.
Trump said the deal involved higher Indian purchases of U.S. energy, coal, technology and farm products, and is the first phase of a broader pact to be negotiated later.
Here are key details so far:
BOOST TO U.S. ENERGY, DEFENCE, TECH PURCHASES
India will increase purchases of U.S. petroleum, defence equipment, electronics, pharmaceuticals, telecom products and aircraft with some farm market access also offered, Reuters reported, citing a government official who declined to be identified.
Although Trump said India would cut tariffs to zero, it is not yet clear which products will see zero duties or phased cuts, as in India's EU and UK trade deals.
U.S. Agriculture Secretary Brooke Rollins said in a social media post on X that the deal will boost American farm exports to India, lifting prices and "pumping cash into rural America."
In 2024, America’s agricultural trade deficit with India was $1.3 billion, she said.
RUSSIAN OIL
Indian refiners have been reducing Russia oil purchases and diversifying supplies toward the U.S., Middle East, Africa and South America. However, refiners will need a wind-down period to exit existing Russian contracts, and the government has not yet ordered a full halt, Reuters reported.
GAINS FOR INDIA
The Federation of Indian Export Organisations (FIEO), a lobby for exporters, said the cut in U.S. tariffs to 18% will significantly boost Indian exports including textiles and apparel, pharmaceuticals, chemicals, footwear, jewellery, and food items like shrimp, putting them on par with Asian peers such as Vietnam and Bangladesh.
After the U.S. tariff hike in late August, sectors such as textiles, jewellery and shrimp were hit, although discounts helped exporters retain buyers.
Still, exports to the U.S. in January–November rose 15.9% year-on-year to $85.5 billion, while imports reached $46.1 billion, government data showed.
Two-way goods and services trade reached $212.3 billion in 2024, with a $45.8 billion U.S. goods trade deficit and a small services trade surplus, according to U.S. government estimates.
TARIFFS ON STEEL, ALUMINIUM
Analysts said although reciprocal tariffs may be lowered under the framework, U.S. Section 232 duties on steel, aluminium, copper, automobiles, auto parts and some other goods are likely to stay.
As a result, a portion of India’s exports to the U.S. will continue to face higher tariffs despite the trade deal.
BOOST TO INVESTOR SENTIMENT
The announcement boosted investor sentiment, with the rupee rising over 1% on Tuesday, the benchmark stock index, the Nifty 50, gaining about 3% after jumping as much as 5%, and the 10-year bond yield falling around 5 basis points.
Analysts said the pact could support exports, capital inflows and the rupee, although a full halt to Russian oil purchases may take time to implement.
(Reporting by Manoj Kumar, Shivangi Acharya, Jaspreet Kalra and Bharat Rajeswaran; Editing by Michael Perry and Raju Gopalakrishnan)
