India and the United States on Monday announced a long-awaited trade agreement that will immediately reduce reciprocal tariffs on Indian goods to 18% from 25% and scrap the additional 25% duty linked to India’s purchase of Russian crude oil. US President Donald Trump confirmed that the deal would be “effective immediately” after a phone call with Prime Minister Narendra Modi, providing instant tariff relief and lifting market sentiment.

The agreement comes after nearly a year of on-and-off negotiations that began in early 2025. Talks had derailed in August when the US imposed tariffs of up to 50% on Indian imports, triggering sharp trade tensions. Negotiations resumed in October, but progress remained slow until the breakthrough announced on February 2, which leaders on both sides have hailed as a strategic and economic milestone.

Markets reacted positively to the development, with expectations of a rally in equities and the rupee. Analysts noted that the tariff reduction significantly improves India’s export competitiveness, particularly in sectors such as textiles, leather, gems and other export-oriented industries. Some estimates suggest that the effective tariff burden could be as low as 12% once exemptions and adjustments are factored in.

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Senior government leaders welcomed the agreement, calling it a boost for domestic manufacturing and bilateral ties. Defence Minister Rajnath Singh described it as a landmark moment that would open a new chapter of deeper economic cooperation, while Finance Minister Nirmala Sitharaman said reduced tariffs were “good news for Made in India products” and thanked both leaders for their role in finalising the deal.

The US business community also reacted positively. US Chamber of Commerce President and CEO Suzanne P. Clark said the agreement would reduce tariffs and non-tariff barriers, benefiting companies and workers in both countries. She added that the deal could be the first step toward a more comprehensive trade framework.

With tariffs now lower than most regional peers, India has emerged with a clear advantage among major export economies in Asia. While details on agricultural concessions and technology transfer are still awaited, the deal is widely seen as strengthening India–US economic ties and setting the stage for sustained trade and investment growth.

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