Trump and India end their trade war, but the peace terms are unclear.
Lower tariffs were welcomed by officials and business leaders, but India has not yet confirmed that it will stop purchasing Russian oil, despite President Trump’s claim that Prime Minister Narendra Modi had agreed to it. On Monday, President Trump and India’s prime minister, Narendra Modi, announced on social media that the punishing tariffs that the majority of Indian goods have been subjected to since the summer of 2017 would be lifted. This brought an abrupt end to the economic war that the Trump administration waged against India. But aside from a new 18 percent tariff rate, all other aspects of the deal, as laid out in Mr. Trump’s post, remained murky.
Mr. was not mentioned in any detail by the Indian side. India’s agreement to spend $500 billion in the United States, according to Trump. Nor did India confirm that it had promised to stop buying Russian oil, as Mr. Trump asserted. The Kremlin said early Tuesday that Moscow had not received any word from India about the cessation of Russian oil purchases but was closely monitoring the situation.
The haziness around the specifics is a hallmark of Mr. Trump’s approach to trade policy. He often heralds agreements before the finer points of a deal have been settled, leaving businesses and investors uncertain about how to proceed. That may allow for the president’s whims to decide whether tensions will rise or fall in the future. At least initially, the announcements were received with a collective sigh of relief. On Tuesday, Asian stocks rose, with India’s shares rising nearly 3%. Mr. Trump was first to share the news, saying that “the United States will charge a reduced Reciprocal Tariff, lowering it from 25% to 18%.” He added, “Our amazing relationship with India will be even stronger.”
In fact, most Indian goods have faced a 50 percent tariff — not 25 percent — since Aug. 6, when Mr. Trump stated that Russia should be punished for the country’s oil purchases. That doubled a tariff that was already set higher than levies burdening India’s competitors in Asia.
Mr. Soon after, Modi posted, praising Mr. and confirming that the two leaders had spoken. Trump personally as a peacemaker and saying the deal “unlocks immense opportunities” for both sides.
Mr. Trump wrote that the new rate would be “effective immediately,” without much elaboration.
“This removes an enormous irritant on the U.S.-India side and opens the path for perhaps more cooperation and convergence,” said Nisha Biswal, a partner at the Asia Group who formerly worked for the U.S. Corporation for International Development Finance. Throughout much of last year, the impasse between India and the United States over trade drew in other grievances, leaving it difficult for businesses and investors to make plans. An especially pointy irritant for Mr. Mr. Modi was Trump’s repeated claim that he helped de-escalate India’s military conflict with Pakistan in May.
Businesses affected, particularly those in India, may have the most pressing concerns regarding the new trade terms. Many of the Indian companies that sold goods to the United States, their biggest export market worth about $40 billion a year, were facing an existential crisis. Mr. Trump wrote that Indians would “move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO,” in exchange for the 18 percent rate their goods will now face.
India levies relatively high tariffs against American goods, charging a trade-weighted average of about 12 percent, while also using an expanding class of other barriers to protect local industries from foreign competition.
Experts were skeptical that India could eliminate every barrier to imports from the United States, as Mr. Trump suggested. To use one charged example, American dairy products, produced by cows with nonvegetarian diets, would send India’s consumers into an uproar, not to mention what it would do to the 70 million Indians who depend on dairy production for earnings.
Similar constraints are expected to keep most American agricultural goods at bay.
“Corn and ethanol were areas that we had heard the Indians might be ready to make some accommodation on,” Ms. Biswal said, but these are the kind of details that have yet to emerge.
Apart from trade itself, Mr. Trump claimed that India had “agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela.” That creates important pressure on Russia to end the war in Ukraine, according to Mr. Trump.
It would be difficult for India to explicitly renounce Russia and its imports, and Mr. Modi’s post gave no sign that it would. India remains neutral in the Ukraine war, bridles at taking direction concerning its military alignments and continues to buy weapons from Russia.
India has reduced its purchases of Russia’s crude oil since the Mr. Trump applied sanctions against companies that trade with its biggest oil firms, Rosneft and Lukoil. Kpler, an analytics firm, noted that India’s imports of Russian oil were down to 1.1 million barrels a day in January, the smallest amount since November 2022.
It remains to be seen if Mr. Trump considers that level of purchases good enough. In November, when India was buying 1.8 million barrels a day, he told reporters that “India has largely stopped buying Russian oil.”
If India reduces its purchases further, that could hit Russia’s oil revenue, which declined significantly last year. The Russian deputy prime minister in charge of energy, Alexander Novak, told Russian media on Tuesday that Russia’s oil supply would always find demand in the market.
India’s imports of American crude have been growing, though they are less than a quarter as much as India buys from Russia. That might be part of what Mr. Trump had in mind when he wrote that Mr. Including energy, Modi had pledged to “BUY AMERICAN” and would spend more than $500 billion on goods. Mark Linscott, senior adviser to the U.S.-India Strategic Partnership Forum and a former assistant U.S. trade representative, said a $500 billion commitment over, say, a decade could be feasible and meaningful. But $500 billion at a go, or in one year, is not realistic.
One factor that might have propelled the Trump-Modi détente was the installation of Sergio Gor, a close associate of Mr. Trump’s, as the ambassador in New Delhi last month.
Also, India and the European Union came to an agreement last week on a huge trade deal that had been in the works for a long time. Their deteriorating trade relations with the United States put pressure on the two sides. It’s possible that the European deal helped Mr. Trump to resolve his differences with Mr. Modi. Officials for the European Union and India are now deep into the process of sorting the details of their transformative new trade partnership. So far, the United States and India have mainly their leaders’ social media truce.
