In a major diplomatic and economic breakthrough, US President Donald Trump signed an executive order on Friday, February 6, 2026 (local time), officially removing the 25% punitive tariff on Indian goods that had been in place since August 2025.
The order, which takes effect at 12:01 AM EST on Saturday, February 7, 2026, marks the de-escalation of a year-long trade war and signals a significant shift in India’s energy and defense policy.
The Trade Deal: From 50% to 18%
Until this week, most Indian exports to the US were burdened by a total tariff of 50%. This was comprised of a 25% “reciprocal” tariff and an additional 25% “penalty” specifically linked to India’s purchase of Russian crude oil.
| Previous Tariff | New Tariff (Effective Feb 7) | Net Change |
| 50% (Total) | 18% | -32% |
- Reciprocal Tariff: Reduced from 25% to 18%.
- Russian Oil Penalty: The 25% surcharge has been completely rescinded.
- Competitive Edge: At 18%, Indian goods now face lower duties than regional rivals like Vietnam (20%), Bangladesh (20%), and China (34%).
The “Russian Oil” Condition
The removal of the penalty is contingent on a major strategic pivot. According to the executive order and recent Truth Social posts from President Trump:
- Commitment to Stop: The US claims India has “committed” to stop importing Russian oil directly or indirectly.
- Pivot to US Energy: India has represented that it will shift its energy sourcing to the United States (and potentially Venezuela).
- Monitoring: The order establishes a mechanism where the US Secretary of Commerce will monitor India’s imports. If India resumes buying Russian oil, the 25% penalty could be reimposed.
- India’s Stance: While PM Modi welcomed the reduced 18% tariff on X, the Indian government has yet to officially confirm the absolute “halt” of Russian oil, previously maintaining that energy security remains a national interest.
Expanding Defense & Investment
Beyond oil, the trade deal includes massive long-term commitments:
- $500 Billion Investment: The White House stated that PM Modi has committed to $500 billion in purchases/investments into the US across energy, technology, agriculture, and defense.
- 10-Year Defense Framework: The executive order highlights a new framework to expand India-US defense cooperation over the next decade. This follows a landmark agreement recently signed between Indian Defense Minister Rajnath Singh and US Secretary of War Pete Hegseth.