India-U.S. Trade Tensions and the Resilience of Emerging Markets: Why Tech and Clean Energy ETFs Are a Strategic Bet

The India-U.S. trade dispute, now in its most volatile phase, has reshaped the investment landscape for emerging markets. While tariffs on Indian exports have sparked short-term volatility, the long-term narrative is one of resilience and opportunity. For investors, the key lies in understanding how geopolitical dynamics are accelerating growth in India's tech and clean energy sectors—areas insulated from trade tensions and poised to outperform.

The Tariff Shock and Its Sectoral Fallout

The U.S. imposition of 50% tariffs on Indian exports—spanning textiles, gems, and chemicals—has rattled markets. These tariffs, framed as a response to India's energy ties with Russia, have triggered a 6.1% decline in the iShares MSCI India ETF (INDA) over the past month. Yet, the damage is uneven. Sectors like pharmaceuticals, smartphones, and renewable energy remain exempt, benefiting from India's strategic trade policies and global demand.

The data is clear: while INDA underperformed broader emerging market ETFs like IEMG and VWO in 2025, its long-term trajectory is underpinned by structural strengths. India's GDP growth of 7.4% in Q1 2025, coupled with a $824.9 billion export surge in FY2024-25, highlights its macroeconomic resilience. The real story, however, lies in the sectors shielded from tariffs.

Tech and Clean Energy: The Unaffected Powerhouses

India's tech sector, a $13 billion export juggernaut, has thrived despite trade tensions. Companies like Tata Consultancy Services and Infosys continue to secure U.S. contracts, leveraging their cost advantages and digital expertise. Meanwhile, the clean energy boom—driven by a 49% renewable energy capacity share and a green ammonia auction pricing breakthrough—positions India as a global leader in decarbonization.

Policy tailwinds are amplifying this momentum. The government's push for green hydrogen production, which now costs half of previous auctions, is set to reduce India's fossil fuel imports and boost energy security. For investors, this translates to opportunities in solar infrastructure, battery storage, and hydrogen-related equities.

ETFs as a Gateway to India's Growth Story

Despite recent outflows, India-focused ETFs remain compelling. The Franklin FTSE India ETF (FLIN), which attracted $615 million in 2025, exemplifies the potential for recovery. While tariffs have dented sentiment, the broader market's fundamentals—low valuations, a young workforce, and a $900 billion foreign exchange buffer—suggest a rebound is imminent.

Moreover, the rise of crypto ETFs in India adds a new dimension. With Bitcoin spot ETFs attracting $386 million globally in May 2025, India's regulated crypto ETFs—offering exposure to digital assets via Demat accounts—are gaining traction. These products, combined with India's 800 million smartphone users, signal a shift toward digital finance.

Strategic Investment Rationale

For investors, the case for India is threefold:
1. Sectoral Diversification: Tech and clean energy ETFs offer exposure to growth areas insulated from trade wars.
2. Policy-Driven Momentum: Government initiatives in renewables and digital infrastructure are creating long-term value.
3. Valuation Attractiveness: Indian equities trade at a 30% discount to global peers, offering a margin of safety.

The risks, of course, are real. The U.S. tariffs could delay India's GDP surpassing Japan's by a year or two. However, the geopolitical calculus is shifting. India's pivot to BRICS and the UK for trade, coupled with its strategic autonomy in energy, ensures it remains a key player in global supply chains.

Conclusion: Positioning for the Long Game

While the India-U.S. trade dispute introduces near-term noise, it also accelerates structural trends. Investors who focus on the sectors and ETFs insulated from tariffs—tech, clean energy, and crypto—are likely to outperform. The key is to balance short-term volatility with long-term vision, leveraging India's policy-driven growth and demographic dividend.

In a world where geopolitical stability is increasingly elusive, India's strategic autonomy and economic resilience make it a standout opportunity. For those willing to look beyond the headlines, the time to act is now.