Trump Turns Up Heat on India, ETFs Feel the Pain
India funds are sharply underperforming this year.
The iShares MSCI India ETF (INDA) is struggling in 2025, underperforming its emerging market peers as President Donald Trump ratchets up trade pressure on India.
On July 30, Trump announced a 25% tariff on Indian imports, citing what he called “unfair” Indian trade practices, including high tariffs and non-tariff barriers. He also pointed to India’s continued purchase of Russian oil and arms, accusing the country of indirectly financing Russia’s war in Ukraine.
This week, Trump went even further, doubling those tariffs to 50% in retaliation for what he said was India’s refusal to stop buying Russian oil.
The moves have spooked investors. INDA, which already trailed its peers earlier in the year, has fallen further behind in the wake of the latest headlines. Year-to-date, the ETF is down 0.2%, compared to gains of 19.2% for the iShares Core MSCI Emerging Markets ETF (IEMG) and 15.7% for the Vanguard FTSE Emerging Markets ETF (VWO).
That underperformance stands out in a year when international stocks have surged, with many overseas markets outperforming even the U.S.
Not Just Tariffs
India isn’t the only country hit by trade restrictions in 2025. China, Vietnam, South Africa, and Brazil have all faced tariff-related headwinds. But India’s case is different.
Over the past five years, Indian equities have significantly outperformed broader emerging markets. INDA is up 71% over that stretch, handily beating most EM peers. That strong performance has pushed the Indian market to a steep premium versus other emerging markets.
As of August, the MSCI India Index trades at around 22x forward earnings, a massive premium to the 13x multiple for the MSCI Emerging Markets Index, and roughly in line with the S&P 500.
When valuations are elevated, markets have little margin for error. And this year, geopolitical risk has delivered a clear negative catalyst.
Investors React
Investors are starting to pull back. Year-to-date, India-focused ETFs have seen $127 million in net outflows. The WisdomTree India Earnings Fund (EPI), iShares India 50 ETF (INDY), and iShares MSCI India ETF (INDA) have each shed between $100 million and $300 million.
The one standout is the Franklin FTSE India ETF (FLIN), which has pulled in $615 million in inflows this year, offsetting much of the broader category’s losses.
What happens with fund flows depends on how the U.S.-India trade dynamic evolves. But for now, one thing is clear: India’s long run of outperformance has hit a wall.
