India-US trade deal announced; Tariff on exports drops to 18% from 50%

India and the US have announced a historic trade deal on Monday, February 2, after months and multiple rounds of negotiations between the two parties. As part of the deal, the 25% reciprocal tariff announced on Indian exports will be reduced to 18%.

The US Ambassador to India, Sergio Gor has confirmed that the overall tariff rate on Indian exports will be down to 18% from the 50% rate that was in place till today.

The deal was announced by US President Donald Trump on his Truth Social account.

"It was an Honor to speak with Prime Minister Modi, of India, this morning. He is one of my greatest friends and, a Powerful and Respected Leader of his Country. We spoke about many things, including Trade, and ending the War with Russia and Ukraine. He agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela. This will help END THE WAR in Ukraine, which is taking place right now, with thousands of people dying each and every week! Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States 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 United States, to ZERO. The Prime Minister also committed to “BUY AMERICAN,” at a much higher level, in addition to over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products. Our amazing relationship with India will be even stronger going forward. Prime Minister Modi and I are two people that GET THINGS DONE, something that cannot be said for most. Thank you for your attention to this matter!" Trump wrote on his Truth Social.

Trump had imposed a 25% tariff on Indian exports late last year as his deadline to sign a deal with countries had lapsed. The tariff was later doubled to 50% as Trump accused India of buying oil from Russia and thereby supporting them in their war against Ukraine.

Both the leaders have spoken on multiple instances in recent times, raising hopes that a deal will eventually be sealed. The deal also comes just days after US Ambassador to India Sergio Gor took charge at his new position. Just a few minutes before the deal was announced, Gor wrote on his social media handle on "X" that "President Trump just spoke to PM Modi. Stay tuned..."

Earlier in the day, Commerce Secretary Rajesh Agarwal also told CNBC-TV18 that a lot of the "sticky issues" with regards to the deal have been addressed and that there is a lot of convergence between the two countries on addressing the reciprocal tariff issue.

A few minutes earlier, President Trump also shared the India Today magazine cover, featuring him and Prime Minister Modi as the Newsmakers of the Year on his Truth Social.

Commerce Minister Piyush Goyal had also hinted at some good news emerging from the US trade deal soon in a conversation with CNBC-TV18 on Sunday after the presentation of the Union Budget.

The GIFT Nifty, an early indicator of how Indian equities will begin trading, surged nearly 600 points after Trump's post on Truth Social.