President Trump takes on Europe with US-India trade deal

US President Donald Trump’s announcement on Monday that he had agreed a trade deal with India, which follows Europe’s own trade deal with New Delhi, shows Washington has no intention of losing out to global competitors.

The US deal comes as global trading partners such as the European Union and India, China and Canada have signed their own trade deals since the new year, appearing to ostracize the US, which has been active in imposing punitive tariffs on trading partners.

Analysts had said these deals, particularly the EU-India deal, could “spark a fire” for the US to complete and crush its stalled trade deal with India, but that happened sooner than most expected.

President Trump announced on Truth Social on Monday that the United States would reduce major tariffs on India from 25% to 18%. He also said the United States would also eliminate the 25% tariffs imposed on New Delhi last summer in retaliation for Russian oil purchases.

In a post on social media, Trump said India would stop buying Russian crude oil, buy “more than $500 billion in American energy, technology, agricultural products, coal and many other products” and eliminate trade barriers with the United States. No official release has yet been issued to accompany President Trump’s remarks.

The US-India deal, which drew cheers from Asian markets on Tuesday, is “a powerful answer to those who think the EU is flanking the US on trade, or speeding up the US,” Terry Haines, founder of analysis firm Pangea Policy, said on LinkedIn.

“The U.S.-India agreement is President Trump’s next major national security x economic ‘interdependence’ trade agreement with a major U.S. ally/non-aligned nation,” Haines said.

He added: “This is a strong sign that President Trump is ‘chewing gum while walking’ and continues to strike major trade deals without letting geopolitics distract him from the US economy.”

Analysts had no doubts about the quick conclusion of the US-India deal, as it comes just a week after the “groundbreaking” EU-India Free Trade Agreement (FTA) was agreed.

Under the FTA, regional power blocs agreed to reduce tariffs on each other’s imports to almost zero, but said the deal would be implemented in stages over several years. Still, both sides hailed the agreement, reached after decades of talks, as the “mother of all agreements.”

Farwa Aamer, director of the South Asia Initiative at the Asian Social Policy Research Institute, commented on Tuesday that the conclusion of the US-India deal is “interesting because it comes on the heels of the EU-FTA”.

“India-US trade negotiations have been going on for some time, but the deal with the EU could have been the catalyst for the US to move forward. Again, it was the leadership-level engagement that we have been talking about from the beginning that ultimately got us to the deal,” he said in emailed comments.

Indian Prime Minister Narendra Modi acknowledged the latest deal with the United States, thanking President Trump for his leadership and posting on X Monday that he was “pleased to see tariffs on Indian-made products reduced by 18%.”

Official details of the deal have not yet been released, but it is seen as a “win-win” for both sides.

“This is a huge deal because it also supports the EU FTA,” Ranen Banerjee, partner and economic advisory leader at PwC India, told CNBC’s Amitoy Singh.

“The signing of the EU FTA and the US (deal) will give a significant boost to jobs and jobs in India. So it’s a win-win for both countries.”

Arpit Chaturvedi, South Asia advisor at Teneo, agreed that the US-India deal “needs to be read in tandem” with India’s FTA with the EU.

“The deal relieves some of the pressure on New Delhi by providing an alternative economic anchor to Western economies amid global tariff fluctuations. Still, the U.S. deal carries greater strategic weight,” he said in an emailed analysis Tuesday.

“Stabilizing trade relations with the US therefore goes beyond tariff calculations and strengthens India’s position in Western supply chains and strategic calculations. The deal also represents a reset in the India-US strategic relationship, perhaps allowing both sides to engage on a relatively equal footing.”

But not everyone was immediately impressed by the U.S.-India announcement, with some analysts warning that more details are needed to assess the deal’s broader, longer-term impact.

Samiran Chakraborty, chief India economist at Citi, said on Tuesday: “Prime Minister Modi’s social media posts have been silent on the Russian oil issue. India is also set to reduce tariffs and non-tariff barriers, but the exact details of those adjustments have not yet been announced.”

He added, “India is also likely to purchase even larger quantities of US goods (President Trump mentioned $500 billion) within the deadline. Details are not yet clear.”

Paul Donavon, chief economist at UBS Global Wealth Management, commented on Tuesday that the deal as we know it will have little impact on Americans who have seen domestic prices rise as a result of President Trump’s global tariff policies, and the extra costs will be passed on to consumers.

“President Trump’s social media posts suggest that a deal has been reached with India to reduce tariffs paid by U.S. importers…[but]this move will have little impact on the affordability crisis in the United States. Indian imports account for less than 3% of total U.S. imports. Tariff increases are quickly passed on to consumers, while tariff reductions are (curiously) unlikely to be passed,” Donovan said on Tuesday’s UBS Podcast.