President Donald Trump has announced a major reduction in tariffs on Indian goods after holding talks with Indian Prime Minister Narendra Modi, in a deal that hinges largely on India’s promise to stop buying Russian crude oil and shift toward alternative suppliers including the United States and Venezuela.
Trump made the announcement on Monday via social media, describing Modi as “one of my greatest friends” and presenting the agreement as a win for both trade and geopolitics.
A big shift for India’s oil supply
India’s pledge could mark a significant change in global energy trade, as the country has been importing about 1.5 million barrels of Russian oil per day, according to trade data firm Kpler.
Russian crude currently accounts for more than one-third of India’s total oil imports, making a full transition away from Moscow a complicated and potentially costly move.
Analysts note that Venezuela’s crude is similar in quality to Russian oil heavy and sour which fits India’s refinery systems.
However, the shift may be difficult in practice. Venezuela’s oil infrastructure remains weak and would require years of investment to restore production levels.
More importantly, India reportedly buys more Russian oil than Venezuela currently produces, raising questions about how quickly India can deliver on the promise.
Still, experts say even a gradual reduction could put additional strain on Russia’s economy, already hit by sanctions linked to the war in Ukraine.
Russia’s discounted crude has been hard to resist
Indian officials have long defended purchases of Russian oil as necessary for energy security.
India is the world’s third-largest oil consumer, and Russian crude has often been sold at steep discounts reportedly around $16 per barrel cheaper than alternatives making it difficult for India to walk away.
But analysts suggest that as global oil prices have eased in recent months, the price advantage of sanctioned oil has narrowed, making a switch more realistic especially with Indian exporters facing heavy US tariffs.
Tariffs slashed from 50% to 18%
Under the new arrangement, Trump said tariffs on Indian goods would drop immediately to 18%, down from 50%. That earlier rate included an extra 25% penalty tariff imposed in August to pressure India into cutting off Russian oil purchases.
A White House spokesperson said the additional tariff would be removed entirely, along with a reduction in the broader “reciprocal” tariff structure.
India promises zero tariffs on US goods, major investments
Trump also claimed Modi agreed to:
Reduce India’s tariffs on US goods to zero,
Remove unspecified non-tariff barriers, and
Increase purchases of American products.
Trump further said India would commit to a $500 billion investment package in US energy, technology, agriculture, coal, and other sectors, although details on timelines and enforcement remain unclear.
Despite the headline-making announcement, oil prices did not react strongly, suggesting traders are cautious about how much the agreement will change actual supply flows.
While India is not among America’s very top trading partners, the numbers are still significant.
The US imported roughly $95.5 billion worth of goods from India in 2025 (as of November), while exporting about $42 billion in the same period.
Key US imports from India include electronics, pharmaceuticals, clothing, chemicals, and jewelry sectors that have already seen pricing pressure in the US due to tariffs.
Beyond trade, the deal also reflects how corporate America continues to expand its footprint in India, where major firms like Microsoft, Google, JPMorgan Chase, and American Express have increased hiring and operations.
For now, the agreement signals a potential shift in Washington’s strategy using tariffs not only for trade leverage, but also to influence global energy alliances and weaken Russia’s oil revenues.
