Trump cuts India tariffs after Modi agrees to halt Russian oil purchases

Hind Al Soulia - Riyadh - WASHINGTON — US President Donald Trump on Monday announced he would reduce tariffs on Indian goods to 18% from 50% in exchange for a promise to stop buying Russian oil and and to lower trade barriers.

Trump said in a social media post that he spoke Monday morning with Indian Prime Minister Narendra Modi, who agreed to replace the country’s Russian crude imports with oil from Venezuela and the United States.

A White House official told Reuters that the US was rescinding a punitive 25% duty on all imports from India over its purchases of Russian oil that had stacked on top of a 25% "reciprocal" tariff rate.

Modi welcomed the reduced tariffs in a post on X, but he did not mention cutting purchases of Russian oil.

India has been importing roughly 1.5 million barrels of Russian oil each day, according to Kpler, a global trade data provider. Russian oil makes up more than a third of India’s overall imports.

Venezuelan oil is of the same quality as Russian oil — heavy, sour and perfect for making derivatives like fuel oil and diesel, which India’s refineries are already set up to process, noted Rob Thummel, senior portfolio manager at Tortoise Capital.

It’s not clear, however, how long that transition may take. India buys more oil from Russia than Venezuela produces.

“Fully replacing Russian oil with oil from Venezuela or the US will take significant investment,” said Rob Haworth, senior investment strategy director at US Bank Asset Management. “But. over time, this may create additional challenges for the Russian economy.”

India is a major purchaser of Russian oil, which has been sanctioned by most Western countries because of Russian President Vladimir Putin’s war with Ukraine.

Indian government officials have defended purchasing Russian oil previously, calling it essential to the country’s energy security. India is the world’s third-largest consumer of oil, and Russia is a close-by seller.

And Russian oil has traded at a significant discount – roughly $16 a barrel – to OPEC or US crude, making it hard for India to quit, noted Robert Yawger at Mizuho Securities. Even after this agreement with the United States, Yawger said he expected India may flout sanctions and purchase Russian oil, as it has throughout the past several years.

“There’s been a zillion different ways they have been able to outflank sanction authorities,” Yawger said. “They’ll find a way to go dark fleet and get those barrels moved.”

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But as oil prices have come down over the past several months, the difference in price between sanctioned oil and non-sanctioned oil eroded, allowing India to make a change.

“When oil prices were high, that was big. But with oil prices coming down, that advantage is not so substantial,” noted Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics and former chief economic adviser for India’s government. “If you throw into the calculus that Indian exporters were suffering from Trump tariffs, it became easier to stop buying Russian oil.”

Trump said Indian goods would immediately face an 18% tariff, down from a 50% – a rate that had included an additional 25% tariff Trump put in place in August to persuade India to stop purchasing Russian oil.

A White House spokesperson told CNN that Trump will fully remove the additional tariff and reduce the so-called reciprocal tariff.

Indian goods had among highest tariff rates imposed by the Trump administration. Because of various exemptions, the effective tariff rate on Indian goods was roughly 35%, according to Subramanian.

Trump, calling Modi “one of my greatest friends,” also said India’s prime minister agreed to reduce India’s tariffs on US goods to zero, and to remove unspecified non-tariff barriers. Although Trump didn’t explain which barriers would be removed, those often include special taxes on US companies’ services or value-added taxes on goods.

India also pledged to invest in American goods “at a much higher level” in addition to a $500 billion invesment in US energy, technology, agriculture and coal among other products, Trump said.

Trump may have been eager to cut a deal with India after the European Union signed a long-sought free trade agreement with India last week, noted Subramanian.

“If India gives preferential access to the EU, US business is affected,” he said. “There has been a domino effect.”

Although India isn’t one of America’s largest trading partners, the reduction in tariffs could nevertheless make a meaningful dent: The United States imported $95.5 billion in goods from India in 2025 as of November, 3% of the value of total imported goods, and it exported $42 billion of goods there over that time, according to the US Census Bureau. — Agencies