What Does the New India-US Trade Agreement Mean for Global Markets?

India's Landmark Trade Deal with the US

New York/Washington: India is set to eliminate tariffs on a wide range of American industrial and agricultural products, including fruits and vegetables, as part of a new trade agreement announced by President Donald Trump, according to a senior US official.

US Trade Representative Jamieson Greer hailed the agreement as a significant achievement, while also noting that India will retain protections in certain critical sectors.

"This is it. The time has come, and now we have the deal. We’ll finish the paperwork, but we know the specifics. It’s a very exciting opportunity," Greer stated during an interview with CNBC Squawk Box.

Greer mentioned that the US will maintain an 18% tariff on imports from India due to the substantial trade deficit, but India has agreed to lower tariffs on various agricultural products, manufactured goods, chemicals, and medical devices, creating a promising opportunity for both nations.

In a separate statement, White House Press Secretary Karoline Leavitt confirmed that India has pledged to cease purchasing Russian oil, with Prime Minister Modi also committing to invest $500 billion in key American sectors.

During a meeting in Washington, External Affairs Minister S Jaishankar and US Secretary of State Marco Rubio expressed their support for the trade agreement and discussed formalizing cooperation on critical minerals exploration and mining.

A State Department summary of their meeting highlighted the importance of democratic collaboration to unlock new economic opportunities and enhance shared energy security.

In a post on Truth Social, Trump announced that the two countries have agreed to reduce the US tariff on Indian imports from 25% to 18%.

India will also move to eliminate tariffs and non-tariff barriers on US goods, according to Trump.

He added that Modi has committed to significantly increase purchases of American products, including over $500 billion in energy, technology, agriculture, coal, and more.

Greer elaborated that the average tariff on industrial goods in India is currently around 13.5%, which will be reduced to zero for nearly all items. He emphasized that this includes a wide variety of agricultural products.

"India, like every other country, has some protections in place for certain key areas, but for many items such as tree nuts, wine, spirits, fruits, and vegetables, tariffs will drop to zero. This is a major win," Greer remarked.

On social media, the USTR noted that India will lower tariffs on a broad range of US industrial and agricultural goods to 0%, marking a historic deal that provides unprecedented market access for American farmers and producers.

Greer also pointed out that while eliminating tariffs is crucial, non-tariff barriers can still pose challenges.

"We have reached an understanding with India regarding various technical trade barriers where they have not accepted US standards," he explained.

"We know American products are safe and effective, and we have effective regulations in the US. We have an agreement on a process for recognizing certain US standards, which is a key aspect of this trade agreement that should open up this market of over a billion people to US goods," Greer added.

When asked about India's previous purchases of Russian oil, Greer noted that prior to 2022-23, India did not significantly import Russian crude.

"They took advantage of a situation where Russian crude was available at a discount due to sanctions. President Trump made it clear that we view this as supporting the Russian war effort," he said.

Greer mentioned that since late last year, India has been reducing its purchases of Russian oil and diversifying its energy sources, including increased imports from the US.

Leavitt confirmed that India is committed to not only halting Russian oil purchases but also increasing oil imports from the US and potentially Venezuela, which she stated would benefit the US and its citizens.

She added that PM Modi has committed to $500 billion in investments in the US, covering transportation, energy, and agricultural products, calling it another significant trade deal facilitated by President Trump.

Earlier, in an interview with Fox News, Leavitt described the recent call between Trump and Modi as productive, highlighting their strong relationship and mutual respect.

"They struck a deal where India has agreed to stop buying Russian oil and to purchase more American oil, and potentially from Venezuela as well," she said.

Leavitt concluded by stating that the US tariff on India will now be set at 18%, while American exports to India will face zero tariffs, marking a significant win for American workers, businesses, and consumers.

Previously, Trump had imposed tariffs of up to 50% on India, including a 25% tariff on Delhi's purchases of Russian oil.