On February 2, 2026, President Trump and Indian Prime Minister Narendra Modi announced that they had reached a long-awaited deal on trade that would reduce U.S. reciprocal tariffs to 18% from 25%. As of this writing, final details on the deal are not yet public, but Trump also said that India is reducing its purchases of Russian oil, thereby eliminating a punitive U.S. tariff of 25%, and that India has committed to purchasing $500 billion in products from the United States and cutting its tariffs to zero. Indian officials, including Prime Minister Modi, have only confirmed the 18% tariff rate.
Specifics aside, the announcements come after a year-long deterioration in relations between Washington and New Delhi, where a series of irritants — especially differences over the May 2025 India-Pakistan conflict — took center stage and appeared to jeopardize nearly two decades of deepening US-India strategic ties.
Stimson experts Elizabeth Threlkeld, Akriti Vasudeva Kalyankar, and Daniel Markey assess these announcements and their wider implications for the United States, India, and the world.
What does this deal mean for the United States?
Elizabeth Threlkeld: For Washington, the US-India deal offers a reset in a relationship that has been a cornerstone of U.S. policy for two decades. Even as the substance of the deal remains uncertain, as a symbol it signifies an end to the annus horribilis the two sides have endured since last spring. What comes next? Given President Trump’s focus on domestic priorities over previous logics of cooperation — especially competition with China — this deal is unlikely to herald a return to the level and types of engagement seen under previous administrations. To the extent that India can align with and support these evolving U.S. policy objectives while managing sources of tension, Washington is likely to welcome a more transactional, and more limited, form of cooperation.
There is much for the Trump administration to celebrate in the initial outlines of the deal, though caution is warranted. Despite President Trump’s claims of India committing to invest $500 billion in the U.S., zeroing out its trade barriers, and stopping the purchase of Russian oil, Prime Minister Modi notably omitted them in his announcement of the deal. India currently imports less than $50 billion in goods from the U.S., making a 900% increase highly unlikely in the near term. On tariffs, U.S. officials have noted that India would eliminate its tariffs on U.S. industrial goods while acknowledging that protections will remain in place for India’s agricultural sector. Likewise, while India’s Russian oil imports declined to a three-year low of just over one million barrels per day, a full elimination will be challenging.
This reality check isn’t a dealbreaker — and it may even be a positive sign. Indeed, the Trump administration has highlighted similar sky-high investment promises with other trading partners. If President Trump sees India as a significant market that is increasingly open for business and willing to invest in the U.S., that may be enough to overcome disputes over details. If India can signal support for other U.S. objectives, including ending the Russia-Ukraine war, purchasing oil from Venezuela, accessing critical minerals, civil-nuclear collaboration, and cracking down on fentanyl precursors, it can demonstrate its continued utility to Washington under a new policy paradigm.
This will be crucial as significant irritants remain in the relationship. These include differences on immigration, India’s broader ties to Russia, both sides’ evolving relations with China, President Trump’s repeated mentions of mediating an India-Pakistan ceasefire and warm relationship with Pakistan’s military chief, and ongoing legal cases involving extraterritorial assassinations and fraud.
It’s likely no coincidence that this deal emerged shortly after U.S. Ambassador to India Sergio Gor arrived in New Delhi, giving India’s leadership access to a key Trump confidant. With Washington signaling openness to a more limited, transactional partnership, New Delhi must decide how far it’s willing and able to adjust to U.S. priorities to keep the relationship on track.
How does this deal look from an Indian perspective?
Akriti Vasudeva Kalyankar: Almost a year ago, when New Delhi started negotiating the first tranche of a bilateral trade deal with Washington, it could not have expected what would follow. After the tariff bloodbath of August and months of charged rhetoric from the U.S. side, New Delhi will take heart in the fact that it was able to rescue an important bilateral relationship through painstaking negotiation and quiet diplomacy. Prime Minister Modi would be relieved about at least partially alleviating the tariff impact on small and medium-scale enterprises (such as textiles, leather, and jewelry), which are among the top exporters to the United States and considered to be a key voter base by the Bharatiya Janata Party.
But in the medium to long term, this deal signifies something broader for New Delhi — India needs capital and technological prowess to build its material capabilities, which the West and particularly the United States can provide. Thus, a trade deal with Washington is unavoidable and consequential. Even as the finer details of the agreement are still to emerge and we do not yet have a fuller picture of who gained and lost what, what is clear is that New Delhi was keen to engage with Washington to arrest the broader downturn in ties.
New Delhi realized how the trade deal hurdle was introducing lethargy in other key areas of cooperation that India seeks from the United States, like critical minerals, AI, nuclear energy, defense innovation, or even multilateral management in balancing the rise of China, such as through the Quad. While some bureaucratic and commercial activity on these counts have continued over the past year (such as the L&T-General Atomics drone collaboration, Google’s AI investments in India, and the Quad table-top exercise on HADR), bureaucracy and industry need the safety net of higher political alignment, which the announcement of this agreement has likely given them.
However, some caution is in order. While this agreement has served to lift the cloud of uncertainty over the bilateral relationship, many tough negotiations lie ahead. New Delhi would also have to satisfactorily answer some tough questions being raised at home about the specific concessions India made. Finally, both sides need to emerge from this episode by figuring out how to future proof the relationship against such a shock. Hopefully, New Delhi and Washington will spend the year ahead conducting a pragmatic reappraisal of their shared interests and how to refocus collaboration on achieving those.
How does this deal look to other world powers?
Daniel Markey: For allies, adversaries, and curious onlookers outside India and the United States, the trade announcements were not surprising; the question was never if, but when, a deal would finally go through. Even so, a dramatic year of ups and downs in US-India relations created unanticipated opportunities for outsiders. China, Russia, Pakistan, and the EU each took full advantage.
For China, Trump’s punitive tariffs and the trade deal’s long delay were great fodder for anti-U.S. propaganda. Beijing opportunistically cast itself as aligned with India in opposition to bullying U.S. tariffs and, seizing upon New Delhi’s evident anxieties, used the moment to push for the return to a more “normal” relationship it had sought ever since the bloody 2020 Galwan Valley conflict. Beijing might now criticize the US-India deal for being evidence of US-India collusion and containment of China, but that criticism is almost certain to be muted. China has already advanced its position with India and will want to see what Trump’s April summit brings before rocking the boat with Washington.
For Russia, the long delay leading up to the trade deal created important opportunities in its relations with India. Most obviously, it kept oil flowing to Indian refineries, an essential source of revenue for cash-strapped Moscow. Perhaps more importantly, US-India frictions over the past year also helped Russia reassert its historic role as a reliable supplier of vital weaponry for the Indian military. Although Russia will undoubtedly pay particular attention to whether India cuts its oil purchases in response to U.S. pressure, New Delhi’s publicly announced plans to stock up on Russian-built air defenses and other high-end defense systems slowed, and may even have reversed, what had been a longstanding Indian pattern of diversifying its arms purchases away from Russian manufacturers.
Pakistan has arguably made more of the 2025 wedge between Washington and New Delhi than any other nation, deftly demonstrating that it was ready, willing, and able to meet the Trump administration’s requests on issues ranging from counterterrorism and critical minerals to Iran, Gaza, the Nobel Prize, and cryptocurrency. Having maneuvered its way back into Washington’s good graces, Islamabad is unlikely to perceive the US-India trade deal as an insurmountable obstacle to continued cooperation with the Trump administration or a return to what under the Biden administration had appeared to be an inevitable march toward exclusive US-India partnership.
Finally, European leaders — stunned by the Trump administration’s approach to international trade and traditional alliance relations — swiftly seized the moment to press their own Free Trade Agreement and security and defense deal with New Delhi. Although the US-India trade deal could distract and sap some of the newfound energy from EU-India ties, many European leaders will likely be pleased to see Washington and New Delhi getting back to business, as a rising Indian economic tide will also float European boats.
Implications of US-India Trade Announcements
By Elizabeth Threlkeld • Daniel Markey • Akriti (Vasudeva) Kalyankar
South Asia
At long last, Washington and New Delhi have announced the conclusion of a sweeping new trade deal. The announcement offers both sides a welcome opportunity to reset their relationship, even if it does not eliminate all the sources of friction that led to a sharp and unexpected deterioration in bilateral relations over the course of 2025. Now the question will be how far the deal can go towards accelerating trade and investment, and which industries and sectors will benefit most. And while India and the United States clearly have much to gain from a closer economic and geopolitical partnership, other powers — China, Russia, Pakistan, and Europe, especially — took full advantage of the extended period of India–US distrust. Can Washington and New Delhi make up for lost time?
On February 2, 2026, President Trump and Indian Prime Minister Narendra Modi announced that they had reached a long-awaited deal on trade that would reduce U.S. reciprocal tariffs to 18% from 25%. As of this writing, final details on the deal are not yet public, but Trump also said that India is reducing its purchases of Russian oil, thereby eliminating a punitive U.S. tariff of 25%, and that India has committed to purchasing $500 billion in products from the United States and cutting its tariffs to zero. Indian officials, including Prime Minister Modi, have only confirmed the 18% tariff rate.
Specifics aside, the announcements come after a year-long deterioration in relations between Washington and New Delhi, where a series of irritants — especially differences over the May 2025 India-Pakistan conflict — took center stage and appeared to jeopardize nearly two decades of deepening US-India strategic ties.
Stimson experts Elizabeth Threlkeld, Akriti Vasudeva Kalyankar, and Daniel Markey assess these announcements and their wider implications for the United States, India, and the world.
What does this deal mean for the United States?
Elizabeth Threlkeld: For Washington, the US-India deal offers a reset in a relationship that has been a cornerstone of U.S. policy for two decades. Even as the substance of the deal remains uncertain, as a symbol it signifies an end to the annus horribilis the two sides have endured since last spring. What comes next? Given President Trump’s focus on domestic priorities over previous logics of cooperation — especially competition with China — this deal is unlikely to herald a return to the level and types of engagement seen under previous administrations. To the extent that India can align with and support these evolving U.S. policy objectives while managing sources of tension, Washington is likely to welcome a more transactional, and more limited, form of cooperation.
There is much for the Trump administration to celebrate in the initial outlines of the deal, though caution is warranted. Despite President Trump’s claims of India committing to invest $500 billion in the U.S., zeroing out its trade barriers, and stopping the purchase of Russian oil, Prime Minister Modi notably omitted them in his announcement of the deal. India currently imports less than $50 billion in goods from the U.S., making a 900% increase highly unlikely in the near term. On tariffs, U.S. officials have noted that India would eliminate its tariffs on U.S. industrial goods while acknowledging that protections will remain in place for India’s agricultural sector. Likewise, while India’s Russian oil imports declined to a three-year low of just over one million barrels per day, a full elimination will be challenging.
This reality check isn’t a dealbreaker — and it may even be a positive sign. Indeed, the Trump administration has highlighted similar sky-high investment promises with other trading partners. If President Trump sees India as a significant market that is increasingly open for business and willing to invest in the U.S., that may be enough to overcome disputes over details. If India can signal support for other U.S. objectives, including ending the Russia-Ukraine war, purchasing oil from Venezuela, accessing critical minerals, civil-nuclear collaboration, and cracking down on fentanyl precursors, it can demonstrate its continued utility to Washington under a new policy paradigm.
This will be crucial as significant irritants remain in the relationship. These include differences on immigration, India’s broader ties to Russia, both sides’ evolving relations with China, President Trump’s repeated mentions of mediating an India-Pakistan ceasefire and warm relationship with Pakistan’s military chief, and ongoing legal cases involving extraterritorial assassinations and fraud.
It’s likely no coincidence that this deal emerged shortly after U.S. Ambassador to India Sergio Gor arrived in New Delhi, giving India’s leadership access to a key Trump confidant. With Washington signaling openness to a more limited, transactional partnership, New Delhi must decide how far it’s willing and able to adjust to U.S. priorities to keep the relationship on track.
How does this deal look from an Indian perspective?
Akriti Vasudeva Kalyankar: Almost a year ago, when New Delhi started negotiating the first tranche of a bilateral trade deal with Washington, it could not have expected what would follow. After the tariff bloodbath of August and months of charged rhetoric from the U.S. side, New Delhi will take heart in the fact that it was able to rescue an important bilateral relationship through painstaking negotiation and quiet diplomacy. Prime Minister Modi would be relieved about at least partially alleviating the tariff impact on small and medium-scale enterprises (such as textiles, leather, and jewelry), which are among the top exporters to the United States and considered to be a key voter base by the Bharatiya Janata Party.
But in the medium to long term, this deal signifies something broader for New Delhi — India needs capital and technological prowess to build its material capabilities, which the West and particularly the United States can provide. Thus, a trade deal with Washington is unavoidable and consequential. Even as the finer details of the agreement are still to emerge and we do not yet have a fuller picture of who gained and lost what, what is clear is that New Delhi was keen to engage with Washington to arrest the broader downturn in ties.
New Delhi realized how the trade deal hurdle was introducing lethargy in other key areas of cooperation that India seeks from the United States, like critical minerals, AI, nuclear energy, defense innovation, or even multilateral management in balancing the rise of China, such as through the Quad. While some bureaucratic and commercial activity on these counts have continued over the past year (such as the L&T-General Atomics drone collaboration, Google’s AI investments in India, and the Quad table-top exercise on HADR), bureaucracy and industry need the safety net of higher political alignment, which the announcement of this agreement has likely given them.
However, some caution is in order. While this agreement has served to lift the cloud of uncertainty over the bilateral relationship, many tough negotiations lie ahead. New Delhi would also have to satisfactorily answer some tough questions being raised at home about the specific concessions India made. Finally, both sides need to emerge from this episode by figuring out how to future proof the relationship against such a shock. Hopefully, New Delhi and Washington will spend the year ahead conducting a pragmatic reappraisal of their shared interests and how to refocus collaboration on achieving those.
How does this deal look to other world powers?
Daniel Markey: For allies, adversaries, and curious onlookers outside India and the United States, the trade announcements were not surprising; the question was never if, but when, a deal would finally go through. Even so, a dramatic year of ups and downs in US-India relations created unanticipated opportunities for outsiders. China, Russia, Pakistan, and the EU each took full advantage.
For China, Trump’s punitive tariffs and the trade deal’s long delay were great fodder for anti-U.S. propaganda. Beijing opportunistically cast itself as aligned with India in opposition to bullying U.S. tariffs and, seizing upon New Delhi’s evident anxieties, used the moment to push for the return to a more “normal” relationship it had sought ever since the bloody 2020 Galwan Valley conflict. Beijing might now criticize the US-India deal for being evidence of US-India collusion and containment of China, but that criticism is almost certain to be muted. China has already advanced its position with India and will want to see what Trump’s April summit brings before rocking the boat with Washington.
For Russia, the long delay leading up to the trade deal created important opportunities in its relations with India. Most obviously, it kept oil flowing to Indian refineries, an essential source of revenue for cash-strapped Moscow. Perhaps more importantly, US-India frictions over the past year also helped Russia reassert its historic role as a reliable supplier of vital weaponry for the Indian military. Although Russia will undoubtedly pay particular attention to whether India cuts its oil purchases in response to U.S. pressure, New Delhi’s publicly announced plans to stock up on Russian-built air defenses and other high-end defense systems slowed, and may even have reversed, what had been a longstanding Indian pattern of diversifying its arms purchases away from Russian manufacturers.
Pakistan has arguably made more of the 2025 wedge between Washington and New Delhi than any other nation, deftly demonstrating that it was ready, willing, and able to meet the Trump administration’s requests on issues ranging from counterterrorism and critical minerals to Iran, Gaza, the Nobel Prize, and cryptocurrency. Having maneuvered its way back into Washington’s good graces, Islamabad is unlikely to perceive the US-India trade deal as an insurmountable obstacle to continued cooperation with the Trump administration or a return to what under the Biden administration had appeared to be an inevitable march toward exclusive US-India partnership.
Finally, European leaders — stunned by the Trump administration’s approach to international trade and traditional alliance relations — swiftly seized the moment to press their own Free Trade Agreement and security and defense deal with New Delhi. Although the US-India trade deal could distract and sap some of the newfound energy from EU-India ties, many European leaders will likely be pleased to see Washington and New Delhi getting back to business, as a rising Indian economic tide will also float European boats.
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