U.S.-India Trade Tensions: Navigating Tariff Risks and Spotting Undervalued Export Winners

The U.S.-India trade relationship in 2025 is a high-stakes chess match. With President Donald Trump delaying the final approval of a comprehensive trade deal—despite completed negotiations and endorsements from key officials—investors are bracing for a potential 20–25% tariff spike on Indian exports. While the U.S. has softened its initial 26% threat, the unresolved standoff has created a volatile environment for global investors. However, within this uncertainty lies an opportunity: identifying Indian companies in export-driven sectors that could thrive regardless of the outcome, whether through a last-minute trade agreement or strategic retaliatory moves.

Textiles: A Sector on the Brink of Rebalancing

India's textile and apparel exports to the U.S. are a double-edged sword. While the sector contributes significantly to India's $129.2 billion bilateral trade surplus, it's also the most exposed to U.S. tariff threats. The U.S. has already imposed tariffs ranging from 1.4% to 28.2% on Indian textiles, and a 20–25% additional tariff could erode margins for exporters. Yet, this tension creates a paradox: companies that diversify production, invest in U.S. manufacturing, or capture market share from China could thrive.

Welspun Living (Welspun India Ltd) stands out as a prime example. As India's largest home textile exporter, it supplies to Walmart, Target, and Costco. Its U.S. automated pillow factory in Ohio not only reduces reliance on Indian exports but also aligns with the U.S. “Make in America” narrative. With a 24% utilization rate at its Ohio plant and plans to expand, Welspun is positioned to capture U.S. sourcing shifts. shows a steady rise, reflecting investor confidence in its strategic pivot.

Gokaldas Exports, a major apparel manufacturer for global brands, is another dark horse. With 80.8% of its revenue from North America, it's poised to benefit from U.S. tariffs driving buyers away from China and Vietnam. The company's recent acquisition of Atraco (a South African textile firm) and expansion in India's central and southern states could add ₹300 crore in revenue by 2026.

Pharmaceuticals: A Shield Against Tariff Volatility

India's pharmaceutical sector is a critical export pillar, accounting for 60% of global generic drug demand. While U.S. tariffs on Indian goods have largely excluded pharmaceuticals and medical equipment (with a base rate of 10%), the sector remains sensitive to geopolitical shifts. A trade deal could unlock further market access, while a breakdown might prompt retaliatory measures like import restrictions or regulatory hurdles.

Dr. Reddy's Laboratories and Sun Pharmaceutical Industries are two firms with strong U.S. footprints. Dr. Reddy's, with a robust pipeline of generic drugs and a focus on R&D, has a 20% revenue share in the U.S. market. Sun Pharma, the largest Indian pharma exporter, benefits from its scale and global distribution network. Both companies have shown resilience during past trade disputes, with highlighting consistent performance.

Aurobindo Pharma is an undervalued gem. Despite its dominance in U.S. generic drugs, its stock valuation lags behind peers. A trade deal could accelerate its expansion into the U.S. specialty pharmaceutical market, where margins are higher.

IT Services: The Unseen Winner

India's IT services sector, a $200+ billion industry, is less directly impacted by tariffs but benefits from the U.S.-India strategic partnership. A trade deal could streamline outsourcing contracts, reduce bureaucratic hurdles, and boost demand for Indian tech talent.

Tata Consultancy Services (TCS) and Infosys are the sector's titans. TCS, with a 30% U.S. revenue share, is already expanding in the U.S. through local hiring and AI-driven solutions. Infosys, meanwhile, has been investing heavily in U.S. data centers and cloud infrastructure. suggests its performance is increasingly tied to U.S. market dynamics.

HCL Technologies and Tech Mahindra are underappreciated players. HCL's focus on digital transformation and cybersecurity aligns with U.S. priorities, while Tech Mahindra's telecom expertise could capitalize on U.S. 5G expansion.

Strategic Retaliatory Plays: Beyond Tariffs

If a trade deal collapses, India's retaliatory strategies could create new opportunities. For example, the Indian government has hinted at expanding “Make in India” incentives for sectors like semiconductors and electric vehicles, potentially attracting U.S. investment. Tata Motors and Mahindra & Mahindra could benefit from this shift, as could Welspun Energy, which is positioning itself as a U.S. solar panel supplier.

The Bottom Line: Positioning for Uncertainty

The U.S.-India trade saga is far from over. While a last-minute deal with Trump and Modi seems likely, investors should prepare for both scenarios. Textile and pharmaceutical companies with U.S. manufacturing or diversified supply chains, and IT firms with strong U.S. partnerships, are best positioned to navigate the volatility.

For those seeking undervalued plays, Welspun Living, Aurobindo Pharma, and HCL Technologies offer compelling risk-reward profiles. Their ability to adapt to shifting trade dynamics—whether through U.S. production, regulatory agility, or strategic diversification—makes them standouts in a high-stakes environment.

As the August 15 deadline looms, the market will test the resilience of these companies. For investors with a long-term horizon, the coming weeks could be a golden opportunity to acquire stakes at attractive valuations.