Last week, US president Donald Trump fired a salvo against Apple’s Tim Cook—demanding that iPhones be made in America, not India. This marks a fresh escalation in his 'America First' crusade. The outburst, laced with characteristic bluster, came despite Mr Cook’s earlier pledge of US$500bn (billion) in US investments. In 2024-25, Apple churned out 40mn (million) iPhones in India, worth US$22bn, with 32mn units (US$17.5bn) exported to the US, Europe, and West Asia. By 2026, the tech giant aims to assemble all US-bound iPhones there, scaling production to 80mn units annually—a boon for both Apple and India’s ambitions as a manufacturing hub. But Mr Trump’s demands threaten to upend this.
It is a reminder that the president’s tariff threats are not merely about trade deficits; they are a battering ram for his broader goal of reshoring manufacturing to American soil. This dual agenda—balancing trade while reviving US industry—puts him on a collision course with the long-term strategies of companies like Apple, which has deftly shifted production from China to India, and with nations banking on manufacturing to fuel growth.
Reshoring, however, is a far thornier issue than trade negotiations. Targeting Apple publicly is only the first example of Mr Trump’s thinking. Expect trade discussions with other manufacturing heavyweights such as Germany, Korea and Japan to be laced with equally contentious demands on reshoring. It will be worse than the trade talks which themselves have not progressed much.
Trade Deals So Far
President Trump’s stream of absurd and chaotic tariff pronouncements—from a tariff rate that was based on trade surplus percentage, to punitive tariffs even on remote islands inhabited by only penguins—have violently shaken up supply chains, trade relations and unit economics of businesses. Countries were given a 90-day ultimatum to negotiate, prompting a frantic scramble to decode his intentions.
In response, they have scrambled to figure out what they were suddenly guilty of and how best to negotiate with the US within a 90-day timeline. Many experts thought that his aim was to lock out China from the global trade chains by first striking major deals with big, long-term trade partners and allies like Japan, Germany and South Korea. They were wrong.
One month later, only two agreements have materialised: one with China (a US$295bn trade surplus foe) and another with the UK (a modest US$12bn surplus ally). Trade deals with the European Union (EU) will prove extremely complicated and are nowhere near in sight; Mr Trump calls EU bigger cheats than China. Japan is in a confrontational mode. There is no deal in sight with Vietnam, a major transhipment hub for Chinese exports to the US. Deals with Canada and Mexico are in a limbo.
While the broad assumption is that Mr Trump’s inflammatory rants will always end with some negotiation, 90-day deadlines can expire, without many of the expected 90 deals with 90 countries, leading to another round of Trump tantrums and accompanying volatility and economic uncertainty.
But, as the Apple example shows, it is reshoring that will be a bigger bone of contention. President Trump is not trying to balance his trade book alone; if he did, countries could very well try to reduce their trade deficit at least partly through imports from the US of high volume (oil & gas) and high value (defence and high-tech) products. He wants both trade deals and reshoring.
But European Union countries are struggling with poor growth, declining population and higher social costs. Flooded by Chinese imports, they can’t shrink their manufacturing base any further. Developing countries need to pull out millions from poverty. The best way to do it is through manufacturing, which alone is scalable and can thereby create massive employment which agriculture cannot. Services cannot make a dent on unemployment in rural and semi-urban areas.
Of course, Mr Trump cannot force Apple to reshore. The US lacks the skilled labour with experience in electronics assembly, needed for precision products like assembling iPhones, tight supply chain of component suppliers (for chips, displays and camera modules) located in China, Taiwan, Japan and South Korea and manufacturing ecosystems (specialised tooling, logistics support, sub- be Regulated, Bancontractors and just-in-time supply networks). It is just not possible for Apple to build all of it from scratch. It is too costly and will take years.
The same is the story for pharmaceuticals, where India has unique competitive advantages. But Mr Trump, of course, will have none of these arguments. His relentless push for reshoring—however impractical—will keep global policymakers and executives on edge. The past four months of chaos have been a spectacle for the masses. For those steering companies and countries, the nerve-shredding roller coaster has not ended. If there seems to be a lull, it is because we may have just seen the end of phase one of the trade wars.
(This article first appeared in Business Standard newspaper)
Comments
Pragna Mankodi
3 weeks ago
President Trump appears more as a bullying person with an unsound mind than an American Statesman. His rhetoric (or threats) hardly make any difference.
It's a wonderful time for a trader with the kind of moody market swings and volatility. Great time for investing too, if one knows where to look and if one has a thick skin (and plenty of dry powder). Uncertainties opens up opportunities to exploit on market fears. It's never a better time to scout for opportunities than geopolitical uncertainty that we are witnessing today. I think the future belongs to Asia -- if it can play its cards right.
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