Trump responds to Europe with an Indian pact, the end of Russian oil and reduced tariffs
- Reduced tariffs and purchase commitments
- Trade balance, markets and sectors benefiting
- Limited details and end of Russian oil imports
- The India-EU agreement and Trump's reaction
- Reactions and prospects following the agreement
The trade agreement between the United States and India announced by Donald Trump on 2 February 2026 represents an abrupt change in bilateral relations after months of tariff confrontation that had raised tensions to levels not seen in decades.
Trump presented it as a clear victory for his doctrine of ‘reciprocal tariffs’, immediately cutting US tariffs on Indian goods from 50% to 18%. In return, New Delhi has committed to halting imports of Russian oil and dramatically increasing its purchases of US products, with Trump mentioning figures in excess of 500 billion dollars in energy (including coal), technology, agricultural products and other goods.
Reduced tariffs and purchase commitments
In his post on Truth Social, Trump detailed that, following a call with Narendra Modi, both leaders agreed to the pact ‘out of friendship and respect.’ India would reduce its tariffs and non-tariff barriers against US goods to zero and would purchase ‘much more’ US products, potentially including Venezuelan crude oil. No exact deadlines were specified for these massive purchases, nor was a detailed timetable provided for the removal of Indian barriers.
The tariff reduction is significant: since August 2025, Trump had imposed a reciprocal 25% plus a punitive 25% linked to Russian crude oil purchases, totalling 50%. Now the punitive component is eliminated and the base rate drops to 18%. Modi celebrated the news on social media, stating that ‘Made in India’ products would face a reduced tariff of 18%, and thanked Trump on behalf of 1.4 billion Indians.
Bilateral trade in 2025 showed a marked surplus in favour of India: from January to November, Indian exports to the US grew by 15.88% year-on-year to $85.5 billion, while imports from the White House reached $46.08 billion.
Trade balance, markets and sectors benefiting
The agreement aims to rebalance this balance by boosting US exports in oil, defence, aircraft, electronics and limited access to the Indian agricultural sector, where New Delhi protects its subsistence farmers.
The impact on Indian markets was immediate and positive. The Nifty 50 index rose nearly 3% in the early hours of 3 February, and the rupee strengthened more than 1% to 90.40 per dollar. Shares of exporters such as Infosys (+4.3%), Wipro (+6.8%) and HDFC Bank (+4.4%) soared, as did the iShares MSCI India ETF (+3.3%).
Analysts such as Neelkanth Mishra of Axis Bank noted that the pact eliminates India's competitive disadvantage vis-à-vis regional competitors: US tariffs are now 19% for Indonesia and 20% for Vietnam and Bangladesh, putting India in a better position.
Indian sectors that will benefit most include gems and jewellery, leather, plastics, ceramics, automotive components and non-technology exports. S.C. Ralhan, president of the Federation of Indian Export Organisations, stressed that lower tariffs will improve competitiveness and integration into global supply chains. Moody's Ratings anticipates a rebound in Indian exports to North America, although it warns of risks if the cut in Russian oil is abrupt.
Limited details and end of Russian oil imports
Details remain limited: neither the White House nor the Indian government has released a complete official document. Indian officials confirmed commitments on purchases of oil, defence goods, aircraft and a partial opening of the agricultural market, plus tariff reductions on imported cars. Trump alluded to purchases of Venezuelan crude oil, but without firm confirmation.
The most controversial aspect is the end of Russian oil imports. India imports 90% of its crude oil and since 2022 has increased Russian purchases due to low prices. In January 2026, they averaged 1.2 million barrels per day, with projections to drop to 1 million in February and 800,000 in March. The Kremlin said it had not received official notification of the cessation. Moody's warned that a sudden cut could raise global prices, inflation in India and put pressure on its economic growth.
The India-EU agreement and Trump's reaction
This turn of events comes after India's massive agreement with the European Union announced at the end of January 2026, described by Brussels as ‘the mother of all agreements’. This pact eliminates or drastically reduces tariffs on more than 90% of goods (up to 96.6% by value in European exports), opens markets for European cars, wines and services, and benefits Indian exports of manufactured goods, textiles, leather and jewellery. It covers some 2 billion consumers and a quarter of global GDP, with annual savings of around €4 billion in tariffs for European companies. It was expected to double EU exports to India by 2032.
Trump reacted quickly so as not to be left behind. By offering India an effective tariff of 18%, he is sending a strong message to Europe and the world. It is not just a matter of balancing trade balances, but of demonstrating that the US can grant more advantageous terms when it chooses to do so, forcing partners to choose sides in a power competition where negotiating first does not guarantee the best position.
If the EU thought it could isolate Trump with alternative agreements that diversify India's options away from Washington, the United States responds by reminding it that it controls the largest and most attractive market on the planet. Indian concessions, such as cutting off Russian oil, which is key to putting pressure on Moscow in the context of Ukraine, are directly in line with the US geopolitical agenda, something that Brussels failed to achieve in its pact with Delhi. It is a dynamic of ‘who can do more’: the European Union is accelerating its agreement to counter Trump's pressure, but Trump is counterattacking by showing that he still dictates the pace and the rewards, forcing everyone to renegotiate on his terms.
Reactions and prospects following the agreement
Piyush Goyal, Indian Minister of Commerce, described it as ‘unprecedented opportunities’ for farmers, SMEs and skilled workers. Suzanne Clark of the U.S. Chamber of Commerce saw it as an initial step towards a broader agreement. Brooke Rollins, U.S. Secretary of Agriculture, anticipated increased agricultural exports to the ‘huge Indian market’.
Although the figure of 500 billion in purchases sounds ambitious and has no defined deadline, the agreement reduces global uncertainty in a complicated 2025 for India: its stock market was the worst among emerging markets and there were record outflows of foreign capital. It opens the door to deeper future negotiations, in a scenario where Trump seems determined not to allow blocs such as the EU to redefine the trade order without his active and dominant intervention.