Trump And Modi Strike Major US India Trade Deal

On the morning of February 2, 2026, President Donald Trump took to Truth Social with an announcement that sent ripples through global markets and diplomatic circles alike: the United States and India had reached a new trade agreement that would dramatically reshape the flow of goods—and oil—between the world’s two largest democracies. The deal, struck in a phone call between Trump and Indian Prime Minister Narendra Modi, promises to lower U.S. tariffs on Indian imports to 18% from the previous 25%, while India, for its part, will reduce its trade barriers against American products to zero and halt its purchases of Russian oil.

According to reporting from BBC, the agreement comes after months of strained relations and tit-for-tat tariffs, particularly following Trump’s imposition of steep duties on Indian goods in August 2025. Those tariffs, which had soared as high as 50%—the highest for any Asian country—were designed in part to pressure India to abandon its energy relationship with Russia, a major supplier of crude oil to the subcontinent. The move hit Indian exports hard, causing them to plummet and prompting New Delhi to seek new economic partners, including a landmark free trade deal with the European Union just a week before this U.S. breakthrough.

In his post, President Trump declared, “He [Modi] agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela. This will help END THE WAR in Ukraine, which is taking place right now, with thousands of people dying each and every week!” Trump also emphasized the immediacy of the agreement, stating that the reduced reciprocal tariff would take effect right away and that India would “move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO.”

Prime Minister Modi, for his part, sounded a note of optimism and gratitude on X (formerly Twitter): “Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement. When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation.”

But behind the celebratory language, the deal’s details reveal both ambition and complexity. Under the agreement, India has committed to buying more than $500 billion worth of American goods, including energy, technology, agriculture, and coal products—a staggering sum that dwarfs previous levels of bilateral trade. Trump’s announcement also specified that India would increase oil purchases from the U.S. and, potentially, Venezuela, replacing the roughly 1.5 million barrels a day it currently imports from Russia. As CNN reported, this is no small feat: Russian oil makes up more than a third of India’s total imports, and the infrastructure required to pivot to Venezuelan or American crude is significant.

“Fully replacing Russian oil with oil from Venezuela or the US will take significant investment,” said Rob Haworth, senior investment strategy director at U.S. Bank Asset Management, in an interview with CNN. He added that such a shift could, over time, create additional challenges for the Russian economy. Yet, the hurdles are steep: Venezuela’s oil infrastructure, for example, has suffered from years of neglect and would need tens of billions of dollars and nearly a decade to restore to its former capacity. India currently buys more oil from Russia than Venezuela is even capable of producing.

Despite the bold commitments, some experts remain skeptical about the speed and scope of the promised changes. “India has been slow-walking these trade talks for months, and the terms here are so vague that they could be anything from major to nothingburger,” said Scott Lincicome, an economist at the Cato Institute, speaking to CNN. Others, like Robert Yawger at Mizuho Securities, pointed out that India has a history of finding creative ways to circumvent sanctions—using so-called “dark fleets” of oil tankers to keep Russian crude flowing into its refineries. “They’ll find a way to go dark fleet and get those barrels moved,” Yawger noted.

Still, the economic calculus for India may be shifting. As oil prices have dropped in recent months, the discount on Russian crude—once as much as $16 a barrel below OPEC or U.S. prices—has narrowed, making alternative sources more attractive. Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics and former chief economic adviser to the Indian government, explained, “When oil prices were high, that was big. But with oil prices coming down, that advantage is not so substantial. If you throw into the calculus that Indian exporters were suffering from Trump tariffs, it became easier to stop buying Russian oil.”

The trade deal also follows closely on the heels of India’s agreement with the European Union, which European Commission President Ursula von der Leyen heralded as “the mother of all deals.” That pact is expected to double EU exports to India by 2032, and some analysts believe it may have nudged Washington and New Delhi to accelerate their own negotiations. “If India gives preferential access to the EU, US business is affected,” Subramanian observed. “There has been a domino effect.”

Reaction in the U.S. has been mixed. Terry Haines, founder of Pangaea Policy, told the BBC that the agreement is “an answer to those thinking the EU is flanking or gaining speed on the US on trade,” and predicted that American markets would “cheer” the deal. Indeed, U.S. stocks edged higher after Trump’s announcement. But not everyone is convinced the deal is a clear win. The coalition We Pay the Tariffs, which represents 800 small American businesses, criticized the new tariff rate of 18% as a “permanent tax hike.” Dan Anthony, the group’s director, stated, “This ‘deal’ locks in a rate six times higher than what we were paying a year ago. That’s not relief, it’s a permanent tax hike that will be in place for a long time.”

Legal questions also linger. The text of the deal has not yet been made public, and it remains unclear whether any formal agreement has been signed. Some Democratic lawmakers and legal experts have questioned Trump’s authority to enact such sweeping trade changes without congressional approval, although the administration contends that executive powers are sufficient for these purposes.

Beyond tariffs and oil, the U.S.-India economic relationship is deepening in other ways. American companies such as Microsoft, Google, and JPMorgan Chase have expanded their presence in India, hiring local workers and opening new offices. In 2025, the U.S. imported $95.5 billion in goods from India and exported $42 billion there, according to U.S. Census Bureau data. The top imports from India include electronics, pharmaceuticals, apparel, and chemicals, while India’s main imports from the U.S. are oil, gas, airplanes, and parts.

Only time will tell whether this deal marks a true turning point for U.S.-India relations or simply another chapter in a long saga of negotiation and rivalry. For now, both leaders are celebrating what they describe as a win for their nations—and perhaps, they hope, for global stability as well.