Trade, oil and Ukraine: What Modi-Trump deal signals | EXPLAINED | India News

India-US trade deal: The US reduced tariffs on Indian goods to 18 percent on Monday, and US President Donald Trump announced that the trade agreement between the two countries “will come into effect immediately.” Following Trump’s post, Prime Minister Narendra Modi expressed his satisfaction about X, saying, “There will now be an 18% reduced customs duty on products produced in India.”

In his Truth Social post, Trump referenced his meeting with Prime Minister Modi, describing the Indian leader as one of his closest friends and a strong, respected leader of India. The US President said the two leaders discussed trade and efforts to end the ongoing war between Russia and Ukraine.

Trump also claimed that Prime Minister Modi had agreed to stop buying Russian oil and significantly increase purchases from the US; However, this claim was not confirmed by Prime Minister Modi. He also stated that as part of the deal, India will reduce tariffs and non-tariff barriers to Washington.

Why is Ukraine at the center of this agreement?

Although India and the US have announced a trade agreement, Ukraine remains central to the broader context of the agreement. Previously, Trump imposed an additional 25 percent tariff on India, directly linking it to New Delhi’s purchases of Russian oil.

The aim of the move was to apply economic pressure on Moscow by discouraging key buyers from pursuing energy trade with Russia in the hope of achieving a ceasefire in the Russia-Ukraine conflict. However, there were allegations that Trump imposed tariffs on India after New Delhi refused to support its Nobel Peace Prize claim.

Trump’s tariff tactics

Trump has used tariffs extensively over the past year as a leverage tool in trade negotiations, often linking them to strategic or political goals rather than purely economic concerns. Although this approach led to talks and negotiations with certain countries, many may have viewed the tariffs as a negotiating tactic designed to gain concessions. Even US Congressional leaders criticized Trump’s tariffs, and the same was argued in the US Supreme Court.

China and Pakistan are at a disadvantage

With customs duties on Indian goods now reduced to 18 percent, India gains a competitive advantage over many regional exporting rivals. The US currently taxes:

• 34 percent customs duty to China
• 19 percent in Indonesia and Pakistan
• 20 percent in Bangladesh and Vietnam

This puts India in an advantageous position compared to other Asian exporters.

The Role of the India-EU Free Trade Agreement

The Free Trade Agreement (FTA), which India recently signed with the European Union (EU) and is described as the “mother of all agreements”, is also seen as an important background for the US decision. The agreement marked major progress between the two major economies and strengthened India’s trade options.

One can speculate that Washington may have been concerned about India moving closer to the EU as a preferred trading partner, prompting US officials to conclude negotiations and reduce tariffs to maintain India’s strategic and economic alignment with America.

Piyush Goyal’s reaction to India-US agreement

Union Minister of Commerce and Industry Piyush Goyal, in a post on X, congratulated Prime Minister Modi, US President Trump and the people of both countries for this landmark trade agreement.

“This unlocks the power of two great democracies working together for the shared prosperity of their people. Both India and the United States are natural allies, and our partnership will co-create technologies, co-develop solutions, and work together for peace, growth, and a brighter future for India and the United States,” he wrote.

Goyal further said, “This agreement unlocks unprecedented opportunities for farmers, MSMEs, entrepreneurs and skilled workers to Make in India for the world, Design in India for the world and Innovate in India for the world. This will help India import technology from the US.” he said.

“This is not just a trade deal, it is a historic milestone that will reshape India-US relations and accelerate our journey towards Viksit Bharat 2047,” the minister added.

I congratulate the Prime Minister @NarendraModi Ji and the President @realdonaldtrumpAlong with the people of India and the United States on this landmark trade agreement. This reflects the power of two like-minded, fair-trading democracies working together for common goals… — Piyush Goyal (@PiyushGoyal) February 2, 2026

What’s next?

At the time of writing, no official statement detailing the terms of the agreement has been released by the Indian government. Economists, traders, exporters and business leaders are watching closely for clarity as more details will determine the real impact of the agreement and provide a clearer understanding of its scope and implementation.

Also check live updates of India-US trade deal: New Delhi starts paperwork for US tariff cuts, reports say