US President Donald Trump and Indian Prime Minister Narendra Modi struck an optimistic tone on September 10, 2025, signaling a potential turnaround in bilateral trade relations strained by recent tariffs. After months of escalating tensions over trade barriers and India’s Russian oil purchases, the leaders exchanged messages on social media, announcing the resumption of negotiations. This development, following a White House announcement of continued talks, marks a de-escalation and paves the way for unlocking deeper economic ties between the world’s largest and fifth-largest economies.
Early Promises to Tariff Tensions
The year 2025 began with high hopes for US-India trade. In February, during Modi’s visit to Washington, both leaders launched “Mission 500,” a bold initiative to expand bilateral trade to $500 billion by 2030. They agreed to negotiate a Bilateral Trade Agreement (BTA) by fall 2025, focusing on reducing tariffs, enhancing market access, and integrating supply chains in goods, services, agriculture, and technology. This built on 2024’s robust growth, where total US-India goods and services trade reached $212.3 billion, up 8.3% from 2023, despite a $45.8 billion US goods deficit.
However, relations soured dramatically in August. Trump imposed initial 25% tariffs on Indian imports, citing unfair trade practices and India’s continued purchases of discounted Russian oil amid the Ukraine war. He doubled them to 50% shortly after, affecting billions in exports like pharmaceuticals, textiles, and IT services—key sectors for India’s economy. Trump criticized the partnership as a “one-sided disaster,” especially after Modi’s attendance at the Shanghai Cooperation Organization summit in China. India, in turn, rejected the tariffs as “unfair and unjustified,” warning of job losses and diversification to other markets like the EU and UK.
The standoff risked broader fallout. Experts warned that the 50% duties could jeopardize decades of strategic progress, including Quad cooperation against China and defense sales. India even considered pausing US arms deals, though officials later denied it. Moreover, Trump’s reported push for the EU to impose 100% tariffs on India over Russian oil added pressure, prompting India to explore alternatives like BRICS ties.
De-escalation
On September 9-10, 2025, Trump posted on Truth Social that teams from both nations continue addressing trade barriers, expressing confidence in a “successful conclusion.” He looked forward to speaking with Modi soon, calling him a “good friend.” Modi responded swiftly, quoting Trump’s message and affirming that negotiations would “unlock the limitless potential of the India-US partnership.” He emphasized working together for a “brighter, more prosperous future,” driving Indian shares up over 0.5%.
This conciliatory exchange followed five rounds of stalled talks, where both sides nearly clinched a deal but faltered on issues like agricultural tariffs—India’s average rate at 39% versus the US’s 5%—and non-tariff barriers. Sources indicate direct leader communication could bridge gaps, with the White House nominating a new ambassador to India as a positive signal. Indian officials remain optimistic about meeting the fall BTA deadline, focusing on mutual concessions like tariff cuts on US goods and increased LNG imports.
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