INDIA — President Donald Trump announced a new India–U.S. Trade Deal on February 2, 2026, after a phone call with Prime Minister Narendra Modi that cuts U.S. tariffs on Indian goods to 18% effective immediately and sets out major new Indian purchases of American goods.
Trump said the agreement reduces U.S. tariffs on Indian goods from an effective 50%—described as 25% reciprocal plus 25% punitive over Russian oil purchases—to 18%, while India commits to buying over $500 billion in U.S. goods including energy, defense, and select agriculture products.
India also commits to dropping tariffs to 0% on many U.S. items, the agreement says, with both sides moving to address non-tariff barriers and recognize U.S. standards.
The pact aims to reduce tariffs on many goods, expand market access, and widen trade in energy, aircraft, agriculture and defense equipment, while improving supply-chain alignment between India and the U.S.
Trade officials and business groups in both countries cast the deal as an attempt to accelerate already-large commerce. Total bilateral trade already exceeds $200 billion annually, and the U.S. imports far more goods from India than it exports.
The long-term aim is to expand trade volumes substantially over the next decade, the agreement says, even as politicians in India argue over how quickly tariff cuts should take effect and how transparently the terms should be published.
Indian export industries stand to gain from the U.S. tariff cut, with lower duties expected to improve competitiveness across labor-intensive sectors. The agreement points to textiles, apparel, leather, footwear, home décor, plastics, gems and jewelry, organic chemicals, rubber, and machinery among the categories that benefit from reduced U.S. tariffs.
Textiles and apparel feature prominently, as lower U.S. tariffs can make Indian goods more competitive in price-sensitive segments. Pharmaceuticals also stand to gain through stable access to the large U.S. healthcare market.
Engineering goods and industrial components could see increased demand from American industry, while gems and jewellery exporters could benefit from a reduced tariff burden that improves margins. Chemicals and specialty products could see better export pricing, and seafood and food processing companies could gain improved access to U.S. consumers.
Supporters in India say the export lift can translate into higher foreign exchange earnings and stronger manufacturing and industrial employment. The agreement also links the push to “positive sentiment in financial markets,” alongside expectations of support for forex reserves, stock markets, rupee strength, and India’s position as a global supply-chain hub.
Commerce Minister Piyush Goyal said the deal opens “huge opportunities” for export sectors, with job growth expected in areas that hire engineers, IT workers, supply-chain experts, analysts, and manufacturing specialists.
“unprecedented”
Jamieson Greer, U.S. Trade Representative, called it “unprecedented” for American farmers and producers, the agreement says.
The agreement also frames the tariff reset as giving India a competitive edge versus other exporters facing higher U.S. duties. It compares tariff levels as China at 34%, Vietnam/Bangladesh at 20%, Indonesia at 19%, and Pakistan at 19%.
For the U.S., the deal expands access to India’s “1+ billion consumers,” and outlines growth targets across energy, agriculture, aerospace and machinery. Energy appears central, with India set to increase U.S. energy imports, including oil and LNG.
U.S. agriculture exporters could gain market openings in products including nuts, fruits, meat products, and grains. Aircraft and aerospace firms could benefit from fleet expansion and defense purchases, while industrial machinery companies could see higher demand tied to infrastructure and manufacturing.
The U.S. side also linked the agreement to its agricultural trade balance with India. The deal cites a 2024 U.S. agricultural trade deficit with India of $1.3 billion, and says improved market access can help narrow that gap.
A core element of the arrangement addresses Russian oil policies that had triggered a punitive levy, according to the deal’s description. It says the U.S. removed the 25% punitive levy after India agreed to halt or reduce Russian crude oil imports and pivot to U.S. and Venezuela energy sources.
On the Indian side, the agreement says tariffs drop to 0% on many U.S. industrial and agricultural goods, citing examples such as tree nuts, wine, spirits, fruits, vegetables, cotton, and soybean oil. It also describes “Buy American” pledges for $500+ billion in petroleum, defense, electronics, pharmaceuticals, telecom, aircraft, and some agriculture.
Even as industry groups in India welcomed lower U.S. tariffs, the sharpest criticism centered on agriculture and the risk that cheaper imports could pressure farm incomes. Economists and farm groups warned that U.S. agriculture operates at large scale, is highly mechanized, and is supported by government subsidies.
Critics say that if tariffs on American farm products fall sharply, lower-priced U.S. imports could undercut local crops, push down farm prices, and squeeze rural earnings. They also warned that weaker farm incomes could slow rural spending, raising fears of a broader rural economic slowdown.
Farmers’ unions have expressed concern, the agreement says, and it notes political unrest as a risk factor in a country where farm incomes shape livelihoods and consumption across large rural regions. Critics also argued the shift could widen rural inequality and create social stress if safeguards are not maintained.
Political debate has played out in India’s parliament, with the deal document noting that opposition leader Rahul Gandhi sparred in Lok Sabha amid arguments about what the agreement means for farmers and how much detail the public has been given.
Indian officials say they will protect sensitive agricultural sectors, keep tariff reductions gradual, and negotiate a balance between farmer interests and trade gains. The agreement says India maintains protections for sensitive sectors including cereals, maize, soybeans, GM foods, rice, beef, sugar, and dairy.
U.S. Secretary of Agriculture Brooke Rollins highlighted gains in non-sensitive areas “without overriding these,” the agreement says.
Still, the deal narrative includes an element of uncertainty inside India’s political system. It says India’s government has stayed silent on $500B purchases and zero tariffs, adding to debate over transparency and leaving critics arguing that details remain unclear.
Beyond trade in goods, the agreement and its supporters point to knock-on effects for skilled work, education, and cross-border business ties that matter to NRIs and families with professional links to both countries. Expanding export sectors in pharmaceuticals, engineering, and manufacturing can create more high-skill jobs in India, the agreement says, and attract investment from U.S. firms.
Business mobility could also increase as corporate collaboration deepens, supporters say, especially in supply-chain planning and industrial procurement. The agreement says stronger trade relationships often lead to easier business mobility and higher corporate collaboration.
Supporters also say tighter commercial ties can provide long-term support for skilled worker migration programs, though the deal description says it includes no direct visa changes. It adds that long-term supply-chain alignment can aid skilled worker flows, without naming specific programs.
Student opportunities also feature in the deal’s claimed spillover effects. The agreement says growing bilateral economic ties can increase research partnerships, support STEM education demand, and expand job prospects for Indian students in the U.S.
For NRIs, the agreement says higher exports can strengthen India’s economy and indirectly support remittances, investment by NRIs, and financial stability, tying trade performance to household decisions and cross-border capital flows.
Strategically, the agreement describes India’s strengthened supply-chain role as part of a wider U.S. effort to position India as a key ally versus China. It also records a counter-argument, saying a Carnegie analysis doubts full trust restoration, while pointing to concerns about dependence created by deeper purchases in energy and defense.
The scale of the trade relationship underpins both the optimism and the scrutiny. Total bilateral trade already exceeds $200 billion annually, and the agreement says the trade deficit to India was $53.5 billion in the first 11 months of 2025, compared with $45.8 billion in 2024.
The tariff shift stands at the center of the commercial reset. The deal says the U.S. cuts tariffs to 18% on many goods, while India moves to 0% tariffs on many U.S. goods, pairing tariff changes with efforts to address non-tariff barriers and U.S. standards recognition.
Implementation remains partly procedural, with the deal saying formal documentation is underway. It describes “papering” in progress and says a comprehensive pact is expected in weeks, while listing no start date beyond the “effective immediately” tariff change.
Trump linked the announcement to his personal ties with Modi. He hailed the agreement as driven by “friendship and respect” for Modi, the deal says, and tied it to Ukraine peace through the shift away from Russian oil.
External Affairs Minister S. Jaishankar met Senator Marco Rubio after the deal, the agreement says, in a sign that the trade package sits alongside wider diplomatic and strategic coordination between the two countries.
Businesses now face the practical work of adapting supply chains and pricing, while Indian politicians face pressure to show how protections for farmers operate in practice. The agreement’s supporters argue it can lift manufacturing and exports quickly, while its critics say the stress test will come in agriculture, where price swings can ripple through rural incomes and national politics.
The coming weeks, as the pact is finalized, will determine how the India–U.S. Trade Deal’s promises on market access, safeguards and standards translate into binding language, even as Total bilateral trade already exceeds $200 billion annually and expectations build among exporters, farmers, students and NRIs on both sides of the corridor.
India–u.s. Trade Deal Boosts Exports and Jobs While Shaping NRI Flows
President Trump and PM Modi announced a transformative trade deal cutting U.S. tariffs on Indian goods to 18% from 50%. In exchange, India will buy $500 billion in U.S. energy and defense products while dropping tariffs on many American goods to 0%. The deal hinges on India reducing Russian oil imports. While promising for industrial growth, the agreement faces domestic criticism in India over agricultural protections.
