American President Trump announced a trade deal with India

American President Donald Trump has “agreed to a trade deal” with India, under which the United States will impose lower reciprocal tariffs, reducing them from 25% to 18%.

• American President Donald Trump said on February 2, 2026 that he and Prime Minister Narendra Modi have “agreed to a trade deal” between the United States and India, under which the United States will impose lower reciprocal tariffs, reducing them from 25% to 18%.
• In a post on his social media handle Truth Social, Trump mentioned his conversation earlier in the day with Prime Minister Narendra Modi.
• Trump said that PM Modi is one of his best friends and a powerful and respected leader of his country. Trump also said that PM Modi and he are two people who get things done.
• He claimed that the Prime Minister agreed to “stop buying Russian oil” and potentially buy much more oil from Venezuela.
• During the same conversation, Trump also indicated that India would source Venezuelan oil instead of Iranian supplies. However, India had already stopped importing Iranian crude oil in 2019.
• The Government of India has not yet made any announcement regarding the trade deal with the United States.
• This agreement comes after several months of negotiations, during which the Donald Trump administration had imposed a heavy 50% tariff on Indian exports to the U.S. Trump has said that India has promised to buy $500 billion worth of energy, tech, agriculture, and coal from the U.S.
• This deal comes a few days after India and the EU announced a trade deal that both sides described as the ‘mother of all deals’. While the European Union, as an economic bloc, is India’s largest trading partner, the U.S. remains the single largest trading partner.

India–US economic relations

• With changes in India’s economic policy in the 1990s, there was a broad improvement in India–US economic relations.
• For the past two decades, the U.S. has been an important trading partner for India in goods and services trade. In 2018, a record trade of USD 142.6 billion took place between the two countries.
• Based on 2025 data, the United States has emerged as a top-three investor in India; for example, during April–June 2025, a record USD 5.61 billion was invested through FDI inflows.
• While historically Singapore and Mauritius were ahead in total investment, the U.S. has significantly increased its share to secure third place (USD 77.27 billion between April 2000 and September 2025).

Trade disputes

• The U.S. has long criticized India’s high tariffs on agricultural and industrial products, while India has objected to non-tariff barriers on pharmaceuticals and IT services.
• In 2018, when the U.S. imposed duties on steel and aluminum, India retaliated by increasing duties on 29 American products.
• The U.S. goods trade deficit with India increased by 5.4% in 2024 to USD 45.7 billion, becoming a growing concern for Washington regarding trade imbalance.
• Visa and immigration restrictions for Indian professionals: Despite strong educational and business ties, visa restrictions and work permit issues continue to create friction.
• The H-1B visa program, which is important for India’s IT sector, is facing quotas, delays, and restrictions on extensions.
• Demand for U.S. green cards among Indians remains high, yet progress is slow due to the number of pending applications and strict annual caps.

India–US defense cooperation agreements

• The foundation of India–US defense cooperation was laid with the General Security of Military Information Agreement (GSOMIA) in 2002.
• In 2016, the Logistics Exchange Memorandum of Agreement (LEMOA) was signed.
• In 2018, the Communications Compatibility and Security Agreement (COMCASA) enhanced access to secure military communications and advanced defense technologies.
• In 2020, the Basic Exchange and Cooperation Agreement (BECA) enabled the sharing of critical geospatial data for military operations.
• Joint exercises and the 2+2 ministerial dialogue were promoted.
• India was designated as a Major Defense Partner in 2016 and was granted Strategic Trade Authorization Tier 1 status in 2018.
• The Defense Trade and Technology Initiative (DTTI), established in 2012, streamlined defense trade and promoted co-production and co-development of defense technologies.
• INDUS-X: The launch of the India–US Defense Acceleration Ecosystem (INDUS-X) in June 2023 promoted defense innovation and industrial cooperation.
• I2U2 includes India, Israel, the United States, and the United Arab Emirates, and is dedicated to joint investments and new initiatives across various sectors including water, energy, transportation, space, health, and food security.