India and US Forge Landmark Trade Pact as Modi Pivots Away From Moscow’s Oil
A dramatic realignment in global trade and energy politics unfolded over the weekend as Washington and New Delhi announced a sweeping agreement that reshapes their economic relationship – and potentially weakens one of Russia’s most important remaining revenue streams.
Under the terms announced by President Trump on social media, tariffs on Indian imports drop sharply to 18% from a punishing 50% rate. In return, India commits to abandoning Russian crude purchases, redirecting its massive energy appetite toward American suppliers – and possibly Venezuelan ones.
How the Deal Came Together
The agreement followed a phone call between Trump and Prime Minister Narendra Modi, capping months of fraught negotiations between the world’s two largest democracies.
Tensions had escalated significantly last August when the White House doubled duties on Indian goods to 50%, explicitly designed to pressure New Delhi into severing its energy ties with Moscow. As recently as earlier this month, Trump warned rates could climb higher still if India failed to act.
A White House official clarified that Washington is withdrawing a separate punitive 25% levy imposed specifically over India’s Russian oil purchases, which had been stacked on top of the existing 25% “reciprocal” tariff – meaning the combined burden had reached crushing levels.
According to Trump’s post, Modi has also pledged to eliminate tariffs and non-tariff barriers against American products entirely, while committing to purchasing over $500 billion in US energy – including coal – along with technology, agricultural goods, and other commodities.
Markets Rally on the Breakthrough
Investors responded swiftly and enthusiastically. US-listed Indian stocks jumped across the board: IT giant Infosys climbed 3.53%, consultancy Wipro surged 7%, banking heavyweight HDFC Bank gained 3.4%, and the iShares MSCI India ETF rose 3.3%.
The relief is understandable. Indian markets had suffered badly since Washington’s tariff escalation, earning the unwanted distinction of worst-performing emerging market in 2025 amid record-breaking foreign capital flight.
Madhavi Arora, economist at Emkay Global, noted the revised rate brings India roughly in line with its Asian neighbours, who face duties in the 15-19% range. The previous disparity had created a disproportionate drag on Indian exports and weakened the rupee considerably.
The Fine Print Remains Murky
For all the fanfare, substance remains thin on the ground. Trump’s announcement omitted critical specifics: when exactly tariff reductions take effect, which American products India has committed to purchasing, and what timeline applies to dismantling trade barriers.
Unlike recent deals struck with Japan and South Korea – which featured concrete pledges to invest hundreds of billions into American industries – the India announcement contained no mention of direct investment commitments.
Neither the White House nor India’s trade and foreign affairs ministries provided additional clarity when contacted for comment.
India’s Energy Gamble
Perhaps the most geopolitically consequential element involves oil.
India imports approximately 90% of its crude requirements, making it the world’s third-largest oil buyer. Since Russia’s invasion of Ukraine in 2022 triggered Western sanctions, New Delhi had capitalised on heavily discounted Russian barrels – significantly reducing its import bill.
However, that purchasing pattern has been winding down recently. Russian crude deliveries to India stood at roughly 1.2 million barrels daily in January and are projected to decline to around one million in February and 800,000 by March.
Replacing Russian supply with American and potentially Venezuelan crude represents a fundamental shift. Trump floated the Venezuelan option over the weekend, following Washington’s military seizure of President Nicolás Maduro in early January – an operation that has apparently opened the door to redirecting that country’s oil exports.
A Week of Dealmaking for New Delhi
The US agreement arrives less than a week after India finalised a long-anticipated trade pact with the European Union, expected to eliminate or reduce duties on 96.6% of traded goods by value – though notable carve-outs protect EU markets for soybeans, beef, sugar, rice, and dairy.
Modi expressed gratitude publicly, offering “big thanks to President Trump on behalf of 1.4 billion Indians.” Trade Minister Piyush Goyal struck an ambitious tone, describing the deal as a catalyst for India to “Make in India for the world, Design in India for the world, and Innovate in India for the world.”
Whether the agreement ultimately delivers on that sweeping vision depends entirely on details that have yet to emerge.
