India’s US-EU Trade Agreements: Who Wins

The India-US trade deal – which will see tariffs on Indian exports cut from 25% to 18% – comes less than a week after India struck a major free trade deal with the EU.

Transaction Notification a A post from TruthSocialTrump said India had agreed to stop buying Russian crude oil. Earlier, it had retaliated by imposing an additional 25 percent tax. India will switch to U.S. and potentially Venezuelan oil, while pledging $500 billion in purchases of agriculture, technology, energy and other products, Trump said.

For now lots of specific details India’s manufacturing sector is seen as a key early beneficiary, according to investors, while IT and pharmaceuticals could also see a boost.

James Thom, chief investment officer for Asia equities at Aberdeen Investments, said the country’s labour-intensive export sector, which includes textiles, clothing, leather, jewellery, toys and furniture, is now able to regain ground lost to the region’s main manufacturing rivals.

Thom singled out small and medium-sized companies as among those to see an increase in the new 18% tariff rate, lower than rival Pakistan’s 19% levy, as well as Vietnam and Bangladesh, which are subject to tariffs of 20% each.

“Removal of this preference should support banks, non-banking financial companies and export-oriented manufacturers, while boosting small and medium-sized retail sentiment,” Thom said in a market comment.

Bernstein said last week’s India-EU deal prompted the US to fast-track Monday’s deal with India. Analysts noted how the deal would align India with the Southeast Asian Association of Nations – a “progressively huge positive” – ​​and how it would boost its standing vis-à-vis China.

Bernstein analysts Venugopal Garre and Nikhil Arela said some sectors, such as autos and metals, may still face sectoral tariffs, but improved relations between the two countries will benefit information technology.

“While IT has the largest exposure in the US and the deal mainly involves manufactured goods, we predict that improved US-India relations, even if short-term, will reduce scrutiny of IT services and reduce the risk of further punitive actions such as additional taxes,” wrote Garre and Arela.

They set a tactical “buy” trade based on a short-term rally in Indian stocks, mainly based on financials, IT and telecoms, while manufacturing and trade-related stocks “should see some recovery”.

Monday’s deal comes hot on the heels of India’s landmark FTA with the EU, which European Commission President Ursula von der Leyen called the “mother of all deals”, which will significantly reduce or eliminate tariffs on a range of goods and services.

BMI, the research arm of Fitch Ratings, zeroed in on India’s pharmaceutical sector, noting the elimination of 11% tariffs on EU drug imports such as cancer therapies, biologics and GLP-1 worth $1.2 billion by 2024.

BMI says lower import costs and improved supply chains underpin its positive outlook for the Indian pharmaceutical space, where it sees the market growing from $31.2 billion in 2025 to $45.7 billion by 2035 — a 10-year compound annual growth rate of 5.2% in local currency terms.

“The agreement will also help firms in India to diversify their export routes and open up new opportunities in the huge EU market,” he added, noting how India’s pharmaceutical exports had stagnated recently.

“This recent slowdown reflects ongoing challenges in market access and regulatory complexity. We believe the FTA will reverse this trend as the deal streamlines regulatory compliance processes, shortens approval timelines and reduces administrative costs associated with product registration and licensing. This will allow exports to resume their growth trajectory.”

AJ Bell investment director Russ Mould said the trade deal had boosted market sentiment and given investors more clarity, noting the Sensex gained 2.5% after the deal. The Sensex consists of 30 of the largest and most actively traded companies on the Bombay Stock Exchange.

UK-listed investment trusts with exposure to India were also among the top gainers on the FTSE 250 on Monday, including Ashoka India’s 5.6%, Mold added.

“For the past few decades, India has been a bountiful source of income for investors, but Trump’s tariff regime has stalled the Sensex’s momentum,” Mold said. “Investors will now wonder if the trade deal will effectively remove the shackles from the market and give it new life, rather than leading to a short-term discount rally.”

— CNBC’s Chloe Taylor and Michael Bloom contributed to this story.