Trump responds to Europe with U.S.-India trade deal

U.S. President Donald Trump’s announcement Monday that he has agreed a trade deal with India comes hot on the heels of Europe’s own trade agreement with New Delhi, signaling Washington is not willing to be outdone by its global competitors.

The U.S. deal comes after global trading partners like the European Union and India, and China and Canada, have signed their own trade pacts since the new year, leaving America — which has been trigger-happy when it comes to imposing punitive tariffs on trading partners — looking ostracized.

Analysts had said those deals, and particularly the EU-India pact, could “light a fire” under the U.S. to get its own stalled trade agreement with India done and dusted, but it has come quicker than most expected.

Trump announced Monday on the Truth Social media platform that the U.S. would cut the main tariff on India from 25% to 18%. He said Washington would also remove an additional 25% tariff it had imposed on New Delhi last summer in retaliation for its Russian oil purchases.

In the posting, Trump said India would stop buying Russian oil and would purchase “over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products” and remove trade barriers with the U.S. There has been no official release to accompany Trump’s remarks.

The U.S.-India deal — which was cheered by Asia markets Tuesday — is “an emphatic answer to those thinking the EU is flanking or gaining speed on the U.S. on trade,” Terry Haines, founder of analysis firm Pangaea Policy, commented on LinkedIn.

“The U.S.-India deal is the next major Trump natsec [national security strategy] x economic ‘interdependence’ trade deal with a major U.S. ally/major unaligned country,” Haines noted.

“It’s a strong signal that Trump is ‘walking and chewing gum at the same time’, not letting geopolitics distract from U.S. economic attention and continuing to do major trade deals,” he added.

The speedy conclusion of the U.S.-India pact has not been lost on analysts as it comes just a week after the “landmark” EU-India free trade agreement, or FTA, was reached.

The FTA saw the regional power blocs agree to reduce tariffs on a range of each other’s imported goods to almost zero, but they also said the agreement would be implemented gradually over a number of years. Still, both sides hailed the deal, reached after decades of talks, as the “mother of all deals.”

Farwa Aamer, director of South Asia Initiatives at the Asia Society Policy Institute, commented Tuesday that the conclusion of the U.S.-India pact “is interesting as the deal comes straight after the EU-FTA.”

“Though India-U.S. trade negotiations were on for a while, the deal with EU could have served as impetus for the U.S. to push forward. Again, it was finally the leadership-level engagement that we have been talking about since the beginning that was able to bring the deal around,” he said in emailed comments.

Indian Prime Minister Narendra Modi confirmed the latest deal with the U.S. had been done, posting on X Monday that he was “delighted that Made in India products will now have a reduced tariff of 18%,” as he thanked Trump for his leadership.

While official details on the deal remain scant, the agreement is seen as a “win-win” for both sides.

“This is a very big deal because it’s on the back of the EU FTA also,” Ranen Banerjee, partner and economic advisory leader of PwC India, told CNBC’s Amitoj Singh.

“With the EU FTA coming in and the U.S. [deal] coming in, it’s going to give a big boost to jobs and employment to India. So I would say that it’s a win-win for both the countries.”

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

“That deal lifted some pressure on New Delhi by providing an alternative Western economic anchor amid global tariff volatility. Even so, the U.S. agreement carries greater strategic weight,” he said in emailed analysis Tuesday.

“Stabilizing trade ties with Washington therefore goes beyond tariff arithmetic and reinforces India’s place within Western supply chains and strategic calculus. The deal also represents a reset for India-U.S. strategic relations, likely enabling both sides to engage on a relatively equal footing.”

Not everyone is immediately impressed by the U.S.-India announcement, however, with some analysts warning that details are needed in order to assess the wider and longer-term impact of the agreement.

“PM Modi’s social media post is silent on the Russian oil issue. India is also supposed to reduce its tariffs and non-tariff barriers, but the exact details of those adjustments have not yet been announced,” Samiran Chakraborty, chief economist for India at Citi, noted Tuesday.

“India is also likely to purchase a higher amount of U.S. goods (President Trump has mentioned $500 billion) though the timeframe … and specifics are yet unavailable,” he added.

Paul Donovan, chief economist at UBS Global Wealth Management, commented Tuesday that the deal, as we know it, would have little effect on U.S. citizens who have seen domestic prices pushed up as a result of Trump’s global tariffs policy, with extra costs passed on to consumers.

“Trump’s social media post suggests a deal has been done with India to reduce the tariffs paid by U.S. importers … [but] the move will have little effect on the U.S. affordability crisis — Indian imports are less than 3% of the U.S. total. While tariff increases are readily passed to consumers, tariff reductions (strangely) are less likely to be passed through,” Donovan remarked in a UBS podcast Tuesday.

Correction: Paul Donovan is chief economist at UBS Global Wealth Management. An earlier version misspelled his name.