Updated - February 03, 2026 04:59 pm IST
NEW DELHI: India and the United States have reached a landmark trade agreement that will see tariffs on Indian goods entering the American market slashed from 50% to 18%, U.S. President Donald Trump announced Monday evening following a phone conversation with Prime Minister Narendra Modi.
The deal comes as major relief to Indian exporters who had been grappling with steep tariffs since last year. Trump had previously imposed 25% reciprocal tariffs on Indian goods, plus an additional 25% penalty linked to India's purchases of Russian oil, bringing the total to 50%.
Under the new agreement, Modi has committed to stopping purchases of Russian oil and increasing energy imports from the United States and potentially Venezuela, according to Trump's announcement.
## Markets Surge on Trade Deal
Indian stock markets responded enthusiastically to the development, with benchmark indices Sensex and Nifty trading nearly 3% higher during Tuesday's afternoon session. Textile, leather, gems and jewellery, seafood exports and specialty chemicals stocks saw particularly sharp gains.
Shares of textile and leather companies jumped as much as 20%, with K P R Mill and Garware Technical Fibres both surging the maximum, while gems and jewellery stocks including Goldiam International and Vaibhav Global also rallied 20%. The Indian rupee strengthened against the dollar following the announcement.
"Delighted that Made in India products will now have a reduced tariff of 18%," Modi said on social media platform X, thanking Trump for the agreement. "When two large economies and the world's largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation."
## Industry Welcomes Agreement
Industry leaders across sectors welcomed the deal as a boost for Indian exports and bilateral economic ties. Bharti Enterprises Chairman Sunil Bharti Mittal called it "a much-awaited and significant milestone" that unlocks opportunities for investments and growth.
"The India-U.S. trade deal adds meaningful momentum to India's growth ambitions and supports the country's aspiration to be a globally competitive manufacturing and innovation hub," said Mahindra Group CEO Anish Shah.
The Gem & Jewellery Export Promotion Council hailed the agreement as "vital relief" for a sector that had faced severe pressure from escalating tariffs. Chairman Kirit Bhansali noted the tariff cut would lower costs for U.S. importers and provide "immense relief to diamond jewellery manufacturers."
However, the Aluminium Extrusion Manufacturers' Association of India noted that aluminium, iron and steel products will continue facing 50% duties under separate Section 232 tariffs.
## Political Reactions Mixed
At a meeting of the NDA Parliamentary Party on Tuesday, Modi described the agreement as a "big decision" that will benefit everyone in the country. Coalition members congratulated him on securing trade deals with both the U.S. and EU.
Opposition parties demanded the government present the full text of the agreement to Parliament. Congress general secretary Jairam Ramesh claimed Modi had "completely surrendered" to U.S. pressure, while Samajwadi Party president Akhilesh Yadav termed opening Indian markets to American agricultural produce a "betrayal" of the country's farming population.
Congress leader Rahul Gandhi alleged the Prime Minister had been "compromised" and "sold out the hard work of Indian farmers."
Commerce and Industry Minister Piyush Goyal was expected to make a statement in Parliament on Tuesday regarding the trade agreement.
## Russian Response
The Kremlin said Tuesday it had not received any official communication from India about halting oil purchases. Spokesman Dmitry Peskov said Russia intends to continue developing relations with India "in every possible way," according to Russian media reports.
Revenue Secretary Arvind Shrivastava said the deal would "further expand and deepen trade between two of the largest economies of the world" and create opportunities for India's labour-intensive and manufacturing sectors in the U.S. market.
Economic Affairs Secretary Anuradha Thakur noted the agreement had "reduced a great deal of global uncertainty" while affirming India's commitment to maintaining fiscal discipline.
*With inputs from PTI, ANI and Reuters*
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