America has reduced the huge 50% tariff on India to just 18%. After a telephone conversation with Prime Minister Narendra Modi on Monday night, US President Trump himself announced a trade deal with India on social media. He wrote on Truth Social that now India will face only 18% tariff, not 50%. PM Modi has also thanked Trump by posting on X for the tariff incident.

However, with this sudden announcement, a question is arising that how did Donald Trump suddenly agree on a trade deal with India? And what is the secret of such a huge reduction in American tariffs? Let us understand in detail…

What did Donald Trump say on trade deal with India?

Announcing the finalization of the trade deal with India, Trump wrote on Truth Social that ‘It was an honor for me to talk to Prime Minister Modi of India this morning. He is one of my closest friends and a powerful and respected leader of his country. We discussed many issues including trade and ending the wars with Russia and Ukraine. Along with stopping buying Russian oil, they have agreed to buy more oil from the US and possibly Venezuela. This will help end the ongoing war in Ukraine, in which thousands of people are being killed every week. Trump further wrote that our wonderful relations with India will become even stronger in future. Prime Minister Modi and I are two people who get things done. Thank you for your attention to this matter!’

What did PM Modi say on American trade deal?

After this announcement by Donald Trump, PM Modi also gave information about this deal on social platform X. He wrote, ‘It was great to talk to my dear friend President Trump today. Glad that now the tariff on Made in India products will be reduced by 18%. On behalf of the 1.4 billion people of India, many thanks to President Trump for this wonderful announcement.

PM Modi further wrote that when two big economies and the world’s largest democracies work together, it benefits our people and opens up a lot of opportunities for mutually beneficial cooperation. Praising Trump, PM Modi said that President Trump’s leadership is very important for global peace, stability and prosperity. India fully supports his efforts for peace. I look forward to working closely with them to take our partnership to new heights.

Why did Trump suddenly soften?

However, there are many strategic and economic reasons behind this sudden announcement by Trump. US President Trump wants to present himself as a ‘global dealmaker’. A big trade deal with a fast growing economy like India is beneficial for them both politically and economically.

On the other hand, India has recently signed a major trade agreement with the European Union (EU), in which it has been decided to reduce or eliminate tariffs on more than 96 percent of the products. Trade experts believe that after the EU deal, pressure also increased on America to enter into an agreement with India on competitive terms, so that American companies are not left behind. In such a situation, this new deal with India will increase American exports and Russia’s income will decrease.

Russia–Ukraine war and energy politics

Trump has also linked this deal to the Russia-Ukraine war. He claims that if India stops buying Russian oil and starts buying American oil, it will help in ending the war. But India’s long-standing policy has been to decide its energy needs according to national interest. In such a situation, Trump’s claim currently appears one-sided.

EU deal connection

Trade experts believe that if the US-India deal is actually implemented, its structure could be very similar to the India-EU agreement. That means reducing tariffs across most product categories, but leaving out sensitive agricultural products. Under international trade rules, India may have to give equal opportunities to America as the concessions given to EU.

What is clear and what is unclear in the Indo-US deal?

Among the things that are clear so far, the most important is that the American tariff has reduced from 25 percent to 18 percent. There seems to be agreement on this from both India and America. But apart from this, Trump has also made many big claims…

• India will reduce its tariffs and non-tariff barriers on US products to zero
• India will buy energy, technology, agriculture and other products worth more than $500 billion from America.
• India will stop buying oil from Russia and will buy oil from America and possibly Venezuela.

The Government of India has not yet given any official confirmation on these claims. There is neither mention of Russian oil, nor of purchase of $500 billion or zero tariff in Prime Minister Modi’s statement.

Overall, Trump’s decision to suddenly reduce tariffs can be considered the result of India’s growing economic strength, the deal with the EU and American domestic politics. However, the complete blueprint of this trade deal is yet to be revealed. At present, it is certain that ‘Made in India’ has got a big relief in the American market, but the final picture on claims like Russian oil, zero tariff and purchase of 500 billion dollars will be clear only after the official documents come.