India and the United States are reportedly moving towards finalizing a long-awaited trade deal that could see tariffs on Indian imports into the US reduced from the current 50% to approximately 15-16%. This development, cited by sources familiar with the matter, is a significant step in strengthening bilateral economic ties.
The potential agreement appears to be contingent on progress in crucial sectors such as energy and agriculture. A key aspect of the deal may involve India gradually decreasing its imports of Russian crude oil. This move follows discussions between US President Donald Trump and Indian Prime Minister Narendra Modi, where trade and energy cooperation were prominently discussed.
President Trump indicated that Prime Minister Modi had assured him of India’s intent to limit oil purchases from Russia. Such a reduction in Russian oil imports by India was reportedly a precondition set by the US for finalizing the trade pact. It’s noteworthy that India’s increased oil imports from Russia, often at a discount, had previously led to a 25% punitive tariff on Indian exports to the US.
Currently, Russia accounts for about 34% of India’s crude oil imports, while the US supplies around 10% of India’s oil and gas needs by value. Beyond energy, the trade deal may also involve India opening its markets to more non-genetically modified (non-GM) American corn and soymeal. New Delhi is also seeking a provision for periodic reviews of tariffs and market access within the agreement.
Sources suggest that the finalization of this bilateral trade agreement could be announced during a meeting between President Trump and Prime Minister Modi at the upcoming ASEAN Summit. India is considering increasing its quota for non-GM maize imports from the US, while maintaining the 15% duty, to meet growing domestic demand from sectors like poultry feed and ethanol production.
Discussions are also progressing on allowing imports of non-GM soymeal for both human and livestock consumption. However, the specifics regarding tariff reductions for dairy products, including high-end cheese, remain unclear, despite being a key demand from the US side.
On the energy front, India’s strategy might involve a gradual shift away from Russian oil while potentially increasing ethanol imports from the US. In return, Washington is expected to offer favorable terms for energy trade, possibly guiding Indian state-run oil companies to diversify their crude sourcing towards the US.
President Trump has publicly stated his belief that India will curb its purchases of Russian energy, linking it to his desire for peace in the Russia-Ukraine conflict. While India’s external affairs ministry has not confirmed specific conversations, any move to scale back Russian energy imports would likely be a phased process. India’s significant reliance on Russian crude oil, particularly after 2022, has been driven by economic considerations and the availability of discounted prices.