India and the United States have finally reached a trade agreement. Discussions between the two countries regarding a trade deal had been ongoing for the past year. However, a comprehensive trade agreement had not yet been finalized. However, on February 2nd (Monday), US President Donald Trump announced that the US was immediately reducing the total tariffs imposed on India from 50 percent to 18 percent. Following his post, it became clear that both countries had agreed on a trade deal, and its terms are expected to be revealed soon.
When did discussions on the trade deal between the two countries begin, and how long did the agreement take?
After the US presidential election results were announced in November 2024, it became clear that when Donald Trump took the oath of office on January 20th, his agenda would be centered on "Make America Great Again" and trade agreements with various countries. Anticipating this, India was among the first to form a trade delegation to engage in discussions with the Trump administration. Indian Prime Minister Narendra Modi was among the first heads of state to visit the US and meet with Trump on February 13-14.
During this time, India expressed its willingness to purchase American energy and weapons. By March, India had initiated bilateral talks, and Commerce Minister Piyush Goyal led a delegation to Washington.
However, despite these efforts, what followed not only stalled the trade agreement between the two countries but also led the US to impose a 25 percent import duty on India due to the trade deficit, and then an additional 25 percent tariff for purchasing oil from Russia. This meant a total of 50 percent tariffs were imposed on India by the US, which were finally removed on February 2, 2026. This means that discussions on the trade agreement between the two countries continued for approximately one year. From calling India the "Tariff King" to imposing a 26 percent tariff
1. Trump's complaints, India takes steps to address them
Since becoming president, Donald Trump has been referring to India as the "Tariff King." He alleged that while the US imposed no import duties on most Indian products, India levied tariffs of 100 to 150 percent on American goods.
Meanwhile, India began taking steps to address Trump's complaints. The first indication of this came in India's 2025 budget, in which India reduced import duties on nearly two dozen products. This included an announcement to reduce the tariff on motorcycles with engines larger than 1600cc from 50 percent to 30 percent. The government also reduced the tax on Bourbon whiskey from 150 percent to 50 percent. This move faced considerable opposition from India's domestic industry.
2. Disagreements over tariffs on agricultural products, announcement of 26% tariff
Despite India's initial attempts to reconcile with the US, the Trump administration continued to complain about India's high tariffs on agricultural products. The US alleged that India imposed heavy tariffs on its edible oils, apples, motorcycles, cars, flowers, coffee, etc. Furthermore, India also regulates the import of milk and fishery products from other countries. Finally, on April 2nd, the Trump administration announced a retaliatory tariff of 26 percent on India. Similar reciprocal tariffs were also imposed on other countries. Trump promoted this as "Liberation Day."
However, during this period, India received considerable relief compared to its trade rivals, as the US imposed tariffs of 54 percent on China, 46 percent on Vietnam, 37 percent on Bangladesh, and 36 percent on Thailand. On the other hand, tariffs of 19 percent were announced on Indonesia, 24 percent on Japan, and 25 percent on South Korea. This meant that India remained competitive compared to all these export-oriented economies.
3. 90-day suspension of tariffs, but India-US relations deteriorate
The US government announced a 90-day suspension of the Liberation Day tariffs to allow other countries to finalize trade agreements with it. However, an agreement could not be reached between India and the US during this period.
It is believed that Donald Trump was upset with India's neutral diplomacy during that period. While Pakistan seized the opportunity despite Trump's claims and nominated the US president for the Nobel Peace Prize, India neither credited the US for stopping the conflict nor mentioned Trump's name.
The US signed trade agreements with several countries and organizations during the 90-day tariff suspension period in April-May. These included the European Union, Japan, Vietnam, etc. However, India did not rush into any agreement. As a result, after the deadline expired, the US president announced a 25 percent tariff on India on July 31 and also threatened to impose an additional 25 percent tariff on India for buying oil from Russia.
During that time, analysts clearly stated that Trump was angry with India because the Indian government had not issued any statement either crediting the US for stopping the conflict with Pakistan or supporting his nomination for the Nobel Prize. On August 7, Trump increased the total tariff on India to 50 percent. Notably, this was the highest tariff imposed on any US trading partner. This further strained relations between the two countries. India responded by making changes to several economic and commercial policies, including GST. This also had an impact on increasing consumption in India.
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