After Europe, a trade deal with the US is announced, with significant tariff reductions

February 5, 2026

Abhishek Vij

When Finance Minister Nirmala Sitharaman presented the economic budget in Parliament, many export expectations were based on the free trade agreement with the 27 countries of the European Union. The trade agreement with the European Union was called the ‘mother of all deals,’ but immediately afterward, Prime Minister Narendra Modi’s attention shifted to President Trump, and now a trade agreement between India and the US has been announced. This success in Modi’s foreign trade policy has given India the best of both worlds.

On one hand, an agreement with Europe has been reached, and on the other hand, Donald Trump, in a phone conversation with Prime Minister Modi, reduced the 25 percent tariff on our country’s exports to 18 percent. The 25 percent additional penalty imposed on oil purchases from Russia was also removed. Trump claims that India will no longer buy oil from Russia. According to Trump, India has agreed to buy oil from Venezuela.

Trump said that this would stop the financing of Russia and help end Russia’s war against Ukraine. On Tuesday, the trade agreement with the US was highly praised in the Indian Parliament, but it was also made clear that India will buy oil from wherever it is cheapest and most readily available. This means that Russia will still remain in the picture.

Trump praised India and its market of 1.42 billion people and expressed his affection for the country. It is being reported that India will reciprocate by reducing its own tariffs. The extent of the tariff reductions remains to be seen, but India is hoping to increase its trade with the US to $500 billion.

Experts say that our trade will not increase so dramatically all at once, but if the situation remains favorable for India, trade will gradually increase. India itself has stated that it will reduce oil purchases from Russia, which Trump has interpreted as a complete cessation of oil purchases. This is less a victory for India’s diplomacy and more a triumph for the country’s massive consumer market of 1.42 billion people. The immense demand generated by this population first attracted Europe, and now it has forced the US, or rather Trump, to acknowledge this reality.

As far as agriculture is concerned, the opposition in Parliament has alleged that this agreement undermines the interests of farmers because the trade deal with the US includes provisions for purchasing energy technology, coal, and other agricultural products. However, it should be noted that the formal draft of the trade deal is yet to be finalized. The final form of the trade negotiations will determine the tariff levels and the decisions of both countries regarding agricultural products. One thing is certain: the US will sell agricultural products to India, and India will buy less oil from Russia.

After announcing this agreement, Modi also spoke of changing the world order and stated that India now has both Europe and the US on its side. This can be considered a victory for India, as Donald Trump has shown flexibility and considered Indian interests in the trade agreement. Undoubtedly, this is a favorable situation for India because it has not lost Russia and has secured trade agreements with both Europe and the US. This is a significant step towards the multi-faceted trade system that Modi advocates.