India Clarifies Terms of New US Trade Pact

India has confirmed its exports will benefit from a sharply lower 18% U.S. tariff, but the change is not immediate as previously announced by Washington.

Commerce Minister Piyush Goyal clarified that the new rate, a significant drop from 50%, will only take effect after both nations sign a joint statement and the U.S. issues an executive order. This timeline differs from President Donald Trump's earlier statement that the reduction was "effective immediately."

Implementation Hinges on Formal Agreement

Goyal stated that the joint statement is expected to be signed within the next four to five days. Following the U.S. action, New Delhi will reciprocate by lowering its own duties on American goods around mid-March, but only once the formal agreement is officially in place.

While financial markets in India initially reacted positively to the news, the absence of official documentation has created confusion, even as leaders portray the deal as a reset in trade relations.

Uncertainty Lingers Over Deal's Full Scope

Prime Minister Narendra Modi’s government has confirmed the core tariff reduction on Indian goods but has not yet verified several other commitments outlined by President Trump. These unconfirmed claims include India agreeing to:

• Halt Russian crude oil purchases

• Import oil from Venezuela

• Reduce tariffs on some American products to zero

Deconstructing the $500 Billion Purchase Pledge

A key point of clarification from Indian officials concerns the announced $500 billion in purchases of U.S. goods. They explained that this figure is not entirely new business but is spread over a five-year period and incorporates deals that were already in the pipeline.

Goyal noted that existing aircraft orders from the U.S. could account for over $100 billion of that total. In recent years, major carriers including Air India Ltd., Akasa Air operator SNV Aviation Pvt., and SpiceJet Ltd. have collectively ordered 590 planes from Boeing Co.

Beyond aviation, Goyal added that India plans to increase its purchases of American energy, semiconductors, and electronic goods over the next five years.