Business & Economics
2026 India-US Tariff Accord Cuts Duties to 18% Tied to $500 B U.S. Goods Pledge
On 3 Feb 2026 the U.S. dropped its tariff on Indian imports from a punitive 50% to 18% after New Delhi pledged massive purchases of American energy, defence and aircraft and signalled a gradual halt to Russian oil buys.
Focusing Facts
- Trump’s announcement lowered the composite U.S. tariff on Indian goods from 50% (25% base + 25% oil-related penalty) to 18%, effective immediately.
- India agreed to purchase up to US$500 billion worth of U.S. petroleum, defence equipment, aircraft and other products over an unspecified period.
- Mumbai’s Nifty-50 index surged nearly 5% on 3 Feb 2026, its steepest single-day rise since 2022, led by textile stocks jumping as much as 20%.
Context
Big bilateral tariff resets tend to follow geopolitical bargains: the 1974 U.S.–Saudi petrodollar pact traded oil security for arms, and the 2019 ‘Phase-One’ U.S.–China deal tied farm purchases to tariff relief. This 2026 accord likewise exchanges market access for strategic alignment—India soft-pedalling Russian energy in return for U.S. concessions. It reflects two long-running vectors: (1) Washington’s use of trade levers to corral partners into its security and energy orbit, and (2) New Delhi’s 25-year push—from the 1991 liberalisation to 2025’s string of FTAs—to knit itself into multiple supply chains without surrendering agricultural sovereignty. Whether the headline US$500 b number materialises matters less than the signal: India is choosing Western markets over discounted Russian barrels. On a century scale this could mark a pivot comparable to India’s 1971 Treaty with Moscow or its 2005 U.S. civil-nuclear deal—moments where commercial agreements foreshadowed deeper strategic realignment. Yet history warns that purchase-linked deals often under-deliver (China’s bought only 57% of its 2020–21 pledges); if promised buys or energy shifts falter, tariffs could snap back, showing the fragility of diplomacy built on transactional tallies.
Perspectives
Indian pro-government & business-friendly media
News18, NDTV Opinion, Zee Business, Devdiscourse — Portray the tariff cut as a ‘game-changing’ breakthrough that will turbo-charge Indian exports, deepen strategic ties with the US and validate Prime Minister Modi’s economic diplomacy. Their upbeat framing downplays the steep purchase commitments to the US and glosses over conditions such as ending Russian oil imports that are mentioned only briefly or not at all in the coverage.
International outlets & analyst-driven coverage
The Straits Times, TRT World, Asianet News — Welcome the deal’s immediate relief for exporters but stress the lack of clarity on timelines, enforcement and the economic risks if India really halts Russian oil buys or opens sensitive farm markets. By foregrounding uncertainties and Moody’s warnings, they may under-state the political dividend in Delhi and amplify worst-case scenarios that are still speculative.
Market-centric financial press
TheQuint, Business Standard — Focus on the stock-market euphoria, highlighting record gains in indices and sectoral rallies as proof that investors see the deal as a major positive signal. The narrow investor-sentiment lens can inflate short-term market moves while ignoring longer-term structural trade or energy concessions embedded in the agreement.