WASHINGTON (AP) – President Donald Trump announced on Monday his intention to reduce tariffs on goods imported from India from 25% to 18%. This decision comes after Indian Prime Minister Narendra Modi committed to halting the purchase of Russian oil, a move aimed at addressing international concerns regarding Russia's aggression following its invasion of Ukraine in February 2022.
The tariff reduction follows months of pressure from the Trump administration for India to decrease its dependence on discounted Russian crude oil. Throughout this period, India capitalized on lower prices from Russia while many nations imposed sanctions aimed at isolating Moscow economically. Trump stated that India would also start reducing its import taxes on U.S. goods to zero, with a goal of purchasing $500 billion worth of American products. In a statement on Truth Social, he emphasized that this agreement could play a significant role in ending the ongoing war in Ukraine, which has resulted in thousands of deaths weekly.
Prime Minister Modi expressed his enthusiasm for the tariff reduction, stating in a post on X (formerly Twitter) that Trump's leadership is crucial for global peace, stability, and prosperity. Modi indicated his eagerness to strengthen the partnership between India and the United States to unprecedented levels.
Historically, Trump and Modi have maintained a friendly relationship, but various geopolitical issues, particularly the conflict in Ukraine and related trade disputes, have complicated this dynamic. Despite his re-election, Trump has faced challenges in fulfilling his pledge to swiftly resolve the Russia-Ukraine conflict. He has often resorted to imposing tariffs without Congressional approval to pursue his economic and foreign policy objectives.
The tariff agreement was announced shortly before Trump’s special envoy, Steve Witkoff, and son-in-law Jared Kushner, were set to engage in another round of discussions with Russian and Ukrainian officials in Abu Dhabi. Trump has asserted that targeting Russia's oil revenue is an effective strategy for incentivizing an end to the nearly four-year war in Ukraine, aligning with his longstanding advocacy for tariffs.
In June, Trump originally introduced a 25% tariff on Indian goods due to what his administration regarded as insufficient efforts by India to decrease its trade surplus with the United States and to liberalize its market for American products. Additional tariffs of 25% were imposed in August in response to India's Russian oil purchases, effectively raising the total tariff rate on Indian imports to 50%.
With India's commitment to stop acquiring Russian oil and the planned reduction of tariffs, the effective rate on Indian goods could decrease to 18%, closely aligning with the 15% tariffs levied on goods from countries like the European Union and Japan.
India's relationship with Russia has predominantly revolved around defense, with Russia being a significant supplier of military hardware to India, though it provides only a small percentage of India's total oil needs. Following the invasion of Ukraine, India has exploited the situation to purchase Russian oil at discounted rates, which has bolstered its energy supply amidst wider sanctions on Russia.
The announcement comes shortly after India and the European Union reached a substantial free trade agreement, which, after nearly two decades of negotiations, could affect roughly 2 billion people. This agreement is set to facilitate free trade across nearly all goods between the EU's 27 member states and India, and aims to lower high import taxes on various products, including European wines and automobiles.
The partnership between the U.S. and India continues to evolve amid the shifting dynamics of international trade, particularly as India strives to complete several trade agreements with other countries. In recent months, India successfully concluded trade agreements with Oman and New Zealand, further establishing its position in global trade.
While both nations seek enhanced cooperation, the U.S. aims for greater market access with zero tariffs for its exports, whereas India exhibits caution regarding opening up sectors such as agriculture and dairy, which are essential for the livelihood of a significant portion of its population.
In the financial context, the U.S. Census Bureau reported a $53.5 billion trade deficit with India over the first 11 months of the previous year, indicating that the U.S. imported significantly more goods from India than it exported. As the world's most populous country with over 1.4 billion inhabitants, India is increasingly viewed as a crucial geopolitical and economic counterbalance to China.
