Business & Economics
Trump–Modi ‘Phase One’ Trade Pact Cuts U.S. Tariff on Indian Goods to 18%
On 3 Feb 2026, President Trump said the U.S. reciprocal tariff on Indian imports would fall from 25% to 18% immediately after a phone call with PM Modi that tied the cut to India curbing Russian-oil purchases and boosting U.S. imports.
Focusing Facts
- Trump’s Truth Social post cites an “effective immediately” drop of the U.S. tariff on Indian goods from 25 % (peaked at 50 % in Aug 2025) to 18 %.
- Trump claims Modi pledged India will spend "over $500 billion" on U.S. energy, technology, agriculture, coal and other products.
- Asia Society analysts note the announcement came one week after India signed an FTA with the EU on 27 Jan 2026, suggesting competitive timing.
Context
Big-power tariff diplomacy has precedents: Franklin D. Roosevelt’s 1934 Reciprocal Trade Agreements Act swapped tariff cuts for strategic alignment during the run-up to WWII, and the 2005 U.S.–India civil nuclear deal traded technology access for geopolitical partnership. Today’s pact likewise leverages market entry to steer India away from discounted Russian crude, reflecting a broader 21st-century trend of using supply-chain dependencies as foreign-policy tools. Whether the 18 % rate endures—or slides to zero as Trump predicts—will depend on how India balances energy security against Western sanctions pressure. Over a 100-year horizon, the episode will matter only if it marks India’s irreversible pivot into the U.S.–led economic orbit; if not, it may join a long list of headline-grabbing but transient tariff truces.
Perspectives
Pro-government Indian media and business outlets
e.g., News18, LatestLY — Present the tariff cut as a “historic” breakthrough that deepens India-US friendship and unlocks huge economic opportunities under Prime Minister Modi’s leadership. Celebrate Modi and Trump while glossing over Indian concessions such as pledging to curb Russian-oil imports or the still-high 18 % duty, reflecting commercial interests and alignment with the ruling party’s messaging.
Indian opposition-aligned/critical outlets
e.g., National Herald — Frame the agreement as evidence that New Delhi is ceding strategic autonomy to Washington, with major policy revelations emanating from Trump rather than the Indian government. Partisan criticism meant to weaken the Modi government may exaggerate U.S. leverage and ignore potential economic gains.
International financial and policy-analysis press
e.g., Investing.com India, Social News XYZ expert commentary — See the pact as a pragmatic, EU-FTA-driven ‘phase-one’ deal that eases tensions but leaves big questions on implementation, zero-tariff timelines and India’s real ability to ditch Russian oil. By focusing on strategic calculus and market effects, analysts may understate domestic political constraints and presume U.S. bargaining superiority.