By: Seshadri Ramkumar, Professor, Texas Tech University, USA
Two major democracies come to an agreement on trade.
United States and India have announced a trade pact which will provide win-win opportunities for both nations.
The announcement of the trade agreement came after President Donald Trump and Prime Minister spoke on February 2nd, 2026. Prior to this agreement, Indian exports to the United States were at 50% that included 25% penalty for Russian oil imports by India.
Announcing on February 2nd (late evening IST), via social media post, President Trump recognizing the importance of India in trade, population and geopolitical scenario has lowered the tariff to 18%.
*In my column on November 21, 2025, “India-United States Textile Trade Collaboration,” I predicted that the tariff range will be between 15 to 20%, which fortuitously has occurred.*
While it took time to get an agreement, given the size of the economies and complicated issues to be managed such as agriculture, it is a sign of relief to Indian exporters and the United States’ consumers that there is a clear picture on the bilateral trade.
Ambassador Sergio Gor in an interview with a major Indian media outlet clarified that eighteen percent tariff rate will be final tariff rate.
In his social media statement Prime Minister Modi stated, “When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation.”
Both leaders have expressed their warm friendships and have recognized India-USA relationship in their posts.
It is a diplomatic and trade victory for Prime Minister Modi who handled the situation well without any immediate retaliation or reciprocal tariffs. It is clear that a lot of back-room discussions and negotiations would have occurred to come to this agreement.
While details are yet to be known, it is a positive sign that a certainty has been reached.
The cumulative tariff for imports into the United States will be 18%, which will bring India into a competitive position with other major exporters.
