Indian ADRs Rally on US-India Trade Agreement Announced by Trump and Modi
In a significant development for bilateral trade relations, US-listed shares of prominent Indian companies experienced a substantial surge following an announcement by US President Donald Trump regarding a new trade agreement with India. The deal, which was revealed after a conversation between President Trump and Prime Minister Narendra Modi, involves a reduction of US tariffs on Indian goods to 18% from the previous 50%. In return, India has committed to halting its purchases of Russian oil and lowering various trade barriers.
Market Reaction and Key Stock Performances
The announcement triggered a wave of optimism among investors, leading to notable gains in several major Indian American Depository Receipts (ADRs) on Wall Street. Infosys, a leading IT services provider, closed 4.3% higher, while Wipro saw an impressive jump of 6.8%. HDFC Bank gained 4.4%, and the iShares MSCI India exchange-traded fund rose by 3%. This positive market response reflects expectations of improved trade access and reduced tariff pressures for Indian exporters.
Details of the Trump-Modi Agreement
President Trump made the announcement on Monday, stating that India would now shift its oil purchases to the United States and potentially Venezuela. A White House official informed Reuters that the US would rescind a punitive 25% duty that had been imposed on all imports from India due to its purchases of Russian oil. This duty was in addition to a 25% "reciprocal" tariff, highlighting the complexity of previous trade tensions.
Prime Minister Modi expressed his enthusiasm for the deal, saying, "Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement." Trump emphasized that India had committed to "BUY AMERICAN at a much higher level," including purchases exceeding $500 billion worth of US energy, technology, agricultural, and other products. He added that India would work towards reducing its tariffs and non-tariff barriers against the United States to zero.
Uncertainties and Limited Details
Despite the immediate market euphoria, several aspects of the agreement remain unclear. Trump's social media post did not specify:
- When the lower tariff rates would become effective.
- The exact timeline for India to cease its purchases of Russian oil.
- The full scope of trade barrier reductions that India has agreed to implement.
As of late Monday, the White House had not issued a presidential proclamation or Federal Register notice, which are necessary to formalize these changes. India's commerce and foreign ministries, as well as Russia's embassy in Washington, did not immediately respond to requests for comment, adding to the ambiguity.
Economic and Strategic Implications
Economists have noted that this agreement brings India's tariff rates broadly in line with those of other Asian peers. Madhavi Arora of Emkay Global commented that the deal would help remove a disproportionate drag on India's exports and its currency, the rupee. Indian markets had been adversely affected by the earlier tariff hikes, experiencing record foreign investor outflows in 2025.
The US business community reacted with cautious optimism. The US Chamber of Commerce described the announcement as progress toward a broader market-opening deal. Suzanne Clark, CEO of the Chamber, stated, "We are optimistic that this is the first step toward a comprehensive trade agreement that will unlock even more private sector collaboration."
Broader Context and Future Outlook
This trade deal emerges amidst efforts by the Trump administration to finalize trade frameworks before a US Supreme Court ruling on the legality of Trump's "reciprocal" tariffs. India, as the world's third-largest oil importer, has already begun reducing its Russian oil purchases, with imports projected to decline sharply in the coming months, according to Reuters reports.
Previous US trade agreements with countries like Japan and South Korea included significant investment commitments, but such pledges were not mentioned in the India announcement, leaving room for further negotiations. The deal marks a pivotal moment in US-India economic relations, potentially setting the stage for deeper collaboration and mutual benefits in the global trade arena.
