India deepens energy trade with U.S. to mend trade relations amid tariff strain

India is ramping up its energy imports from the U.S. in a bid to reduce its trade surplus with Washington — a key demand of the Trump administration during trade negotiations with New Delhi.

On Monday, Hardeep Singh Puri, Indian union minister of petroleum and natural gas, announced a deal that will see the United States supply nearly 10% of New Delhi’s liquefied petroleum gas (LPG) imports.

Indian state-owned oil companies have signed a 1-year deal to import around 2.2 million tonnes per annum of LPG, from the U.S. Gulf Coast, he said in a post on X, calling it “a historic first.”

This would be the “first structured contract of U.S. LPG for the Indian market” and the purchases would be based on “Mount Belvieu as the benchmark for LPG purchases,” he said.

“We believe that this move is for diversifying our LPG sourcing, which is currently concentrated in the Middle East, and also to reduce trade surplus with the U.S.,” Nomura’s equity analyst for energy Bineet Banka told CNBC in an emailed response.

India’s total LPG imports are around 20-21 million tons annually, he said adding that if 10% of that supply is sourced the U.S., at current prices, it implies an incremental import of $1 billion from the U.S. Though Banka said that the incremental imports are “not much” compared with the India’s trade surplus of $40 billion with the U.S.

Since August, ties between the U.S. and India have been strained after Washington imposed a tariff of 50% on Indian goods. Reciprocal tariffs of 25% were imposed on Indian goods as part of a broad strategy to address trade imbalances and boost domestic industries, while the other 25% was due to India’s import of Russian oil.