Trump Modi Xi Love Traingle ! US President Trump has waged a trade war against China’s Xi Jinping; and its impact will benefit his good friend Indian PM Modi’s Make in India campaign as Apple and other IT giants bring manufacturing to India.
When two giants collide, shockwaves impact everyone else. The US-China trade war has stirred a global economic slowdown. Major economies are feeling the heat of sanctions destabilizing markets worldwide. But the tensions have a bright spot for PM Modi and iPhone maker Apple India plan.
While Trump and Xi Jinping share a volatile relationship, Indian counterpart Modi is endeared by the POTUS.
And the latest statements from the US President come across as pro-India, that seems certain to benefit.
In the latest development, President Trump has asked American companies to shed their Chinese reliance and shift manufacturing to other countries. This has sparked speculation around a future where Apple India plan to shift manufacturing operations to India.
Trump Modi Xi Love Traingle! Trump’s grudge with China and Xi
The global trade war started when the US accused China of stealing American Intellectual Property by imitating US goods and technologies. The US also aimed at protectionist policy by the Chinese government, especially to its “Made in China 2025” programme to make China a manufacturing hub.
The US also accused China on subsidizing steel exports, which in practice is termed as ‘dumping’ to the rest of the world. Dumping (of any good) in different countries is a practice to harm the local manufacturer, which has hit jobs in the US.
Sanctions and Tariff tussle
Since the beginning of the year 2018 both the countries are imposing tariffs on each other, including solar panels, steel and aluminium products, agricultural products which further accelerated the tension between US and China.
The US trade deficit with China in 2018 has been reported at around $400 billion.
Furthermore, the tariffs are to be raised from 25% to 30% on $250 billion worth of Chinese goods at the beginning of October 2019. Further tariffs will be enforced of 10% to 15% on the remaining $300 billion goods. The US trade deficit with China in 2018 has been reported at around $400 billion.
On 23rd August, Ministry of Finance (China) announced new rounds of tariff imposition on $75 billion worth of US goods which probably begin in September of this year. On the contrary, US President tweeted that he “hereby ordered” American companies to immediately start looking for an alternative to China.
Why India is the likely beneficiary?
The 2019 G7 summit is probably one of the most significant diplomatic achievements for India. The US and France both seconded India’s Kashmir step and told Pakistan to indulge in bilateral talks with India.
However, the biggest achievement for Modi from G7 is an upcoming opportunity to realize his Make in India mission. US President Trump has urged American companies to start looking at alternative locations to China for their produce.
Major win for India if Apple and others abide
China is considered to be a manufacturing giant. But the stringent relation between Trump and Xi have had a negative impact on China’s aura as the IT manufacturer of the world. If Apple sets up manufacturing facilities in India and others follow suit, this could be a great sign for PM Modi’s “Make in India” campaign.
To make India a manufacturing hub is a dream which needs a lot of foreign investment along with the low tariff rates and less protectionist measure if not an open market. This has put India in financial difficulties and market dependence on other larger economies. For this reason Apple India plan hasn’t taken flight as yet.
The announcement made on 23rd August by Modi government is seen as a slew of measures to revive growth momentum.
Change in India’s image as a favoured US ally
The recent announcements from Finance Minister Nirmala Sitharaman included dropping of contentious surcharge on FPIs (Foreign Portfolio Investors). Experts believe this will benefit the Indian economy.
FPIs had infused in February Rs. 11,182 crores, March Rs. 45,981 crores, April Rs. 16,093 crores, May Rs. 9,031 crores and in June Rs. 10,384 crores. However, from July to August, FPI withdrew nearly Rs. 25,000 crores. In the second week of August, BSE Sensex lost 649.17 points, but there was a gain of 228 points ahead of the announcement on 23rd by Modi government.
Industry welcomes such a move
US-India Strategic and Partnership Forum (USISPIF) also welcomed the announcement on withdrawing heavy surcharge and said, “the move will go a long way in reviving the investment sentiments of foreign investors and will provide a much-needed impetus to the India economy.”
USISPF estimates that #USIndia bilateral trade is likely to grow from $143 billion to $238 billion by 2025. This growth will occur if trade grows by 7.5% each year, as has been the trend for the last 7 years. Take a look at our outlook and our report here: https://t.co/QfJBxUFaGF pic.twitter.com/JLy07TDRim— USISPF (@USISPForum) July 11, 2019
Factories are already leaving China when higher tariffs are imposed. USISPIF in one of their statement (post-Indian general elections) said that around 200 American companies are seeking to move their manufacturing from China to India.
How India’s economy would benefit from Apple’s operations?
Right now, India’s export to the US amount to $52.4 billion and imports from the US amount to $35.5 billion. If the step taken by the Modi Government goes in the right direction, then India might soon see significant foreign investment from foreign companies like Apple planning to make bases in India.
Low unemployment is a factor which made US companies find factory workers outside for extremely low wages. They turned to China’s labourer-intensive economy. India is also among countries with cheap human labour. That might have an effect on the future of manufacturing for companies like Apple and others.
Trump Modi Xi Love Traingle! President Trump – PM Modi Bromance
President Trump and PM Modi have seen a growing warmth in their relationship right from the beginning of Trump’s arrival in the White House. Whether it’s about fighting against the terrorism or expedition in the South China Sea or bilateral or trilateral defence programmes or about strengthening bilateral trades, both have consensus on a number of subjects.
President Trump and PM Modi are often found exchanging pleasantries and indulging in one-on-one conversations during state visits, summits like G7 summit, G20 summit, and more.
US is at the top of the World economy. On the other hand, India is the biggest and fastest emerging global market for American companies. The amiability between the two politicos works well for the two economies and likely with expedite Apple India plan.
The reality on the ground for Apple?
Recently, Apple CEO Tim Cook had warned President Trump on trade war. Cook had said that China tariffs could hurt Apple’s market and boost Samsung market, which is a rival company. Apple is seeing turbulent times as its sales in 2018 dipped to 1.7 million iPhones compared to 3.2 million iPhones in 2017.
But with Trump refusing to budge, Cook has to look elsewhere. India is one of the fastest-growing mobile markets worldwide. For long, there’s been an Apple India plan evaluating prospects of bringing manufacturing here. Apple is now in talks with Indian officials.
How the Modi Government has been helpful?
Recent Modi government announcement on easing local sourcing norms to attract foreign investment and companies that only sells their brand is like music to Apple’s ears. As per media reports, the announcement is likely to encourage Apple to set up more stores and manufacturing units in different possible places.
According to Livemint report, by an anonymous official- export of goods from a foreign company’s factory in India will be accounted as local sourcing. As per the current policy, a foreign company needs to purchase 30% of their products locally. This has been an afflicting point for many foreign investors, including Apple India plan of domination.