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America and India Make Oil Deal: Trump's Power Over Trade

America and India Make Oil Deal: Trump's Power Over Trade

Summary

What Happened?

On February 2, 2026, Trump and Modi made a deal. Trump lowered taxes on Indian products from 50% to 18%. Modi agreed to reduce Russian oil purchases and buy from America instead.

Before

America taxed Indian products 50%

After

America taxes Indian products 18%

Why Did America Put High Taxes on India?

Trump said India bought too much Russian oil. He wanted India to stop buying Russian oil because Russian oil money pays for Russia's war in Ukraine. Trump said: "Buy Russian oil, and I tax your products 50%."

India's Oil Problem

India needs oil because it has 1.4 billion people and a growing economy. But India does not produce much oil.

India buys oil from many countries.

When Russia invaded Ukraine in 2022, Russia's oil became cheap (other countries refused to buy). India bought cheap Russian oil to save money.

In 2024: India bought about 1.5 million barrels of Russian oil every day. That is 36% of all India's oil.

Trump's Demand

Trump said: Stop buying Russian oil. Buy American oil and Venezuelan oil instead.

Problem for India: American oil and Venezuelan oil cost more money than Russian oil. If India switches, it pays $9 billion to $11 billion more per year for oil.

But Modi accepted ( there is ambiguity ) this because:

If tariffs stayed at 50%, Indian companies could not export things

Exports bring money to India

Loss of exports would cost more than loss from expensive oil

The Deal Works for Trump Because:

Stops Russian oil sales (Russia loses $23 billion per year)

Russia has less money for Ukraine war

America sells oil to India instead

Venezuela controlled by America

India becomes closer ally

What About Russia?

Russia sells 1.5 million barrels of oil to India every day. If India reduces to 600,000 barrels, Russia loses $23 billion per year.

But Russia cannot punish India because India buys military weapons from Russia. If Russia cuts weapons sales, India buys from America or Europe instead.

So Russia accepts the loss.

Is This Good for India?

Good

Lower taxes on Indian exports

Better trade relationship with America

Bad

Oil costs $9-11 billion more per year

Less control over energy

Depends on America

Modi made the best deal he could.

Higher oil prices are better than 50% export taxes.

Reciprocal Tariff Realignment and Strategic Recalibration: The United States-India Trade Architecture in February 2026

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