These days, Indian society is increasingly perceiving a significant rise in the interference of American President Trump.  Initially, on the evening of May 10, he announced a ceasefire between India and Pakistan on social media platforms.  Two days later, he issued a peculiar statement that could potentially impede the growth of the Indian economy: advising that Apple Inc. should not substantially expand its production in India.  Following this pronouncement, considerable confusion has emerged within the Indian industrial sector and society, as there was a mutual consensus between Apple and the Indian economy that by the end of the June quarter of the current fiscal year, approximately over 10% of Apple’s global sales would be produced in India.  Trump’s recent statement now casts doubt on this agreement.  The question arises: why did Trump make such a statement?  Does he not consider India a friend?  Numerous such questions are being raised.  Amidst all this, it is crucial to view the mutual agreement on tariff rates between the United States and China on May 12 as a significant diplomatic development.  This suggests that Trump may have covertly assured China that Apple would not relocate more than 50% of its production from China to India to facilitate mutual improvements in tariff policies.  It is noteworthy that during his second term, President Trump consistently astonished the world with his tariff policies.  Adhering to the ‘America First’ policy, he initially targeted China, imposing a 145% tax on imports from China.  In retaliation, China levied a 110% tax on American imports.  However, on May 12, Trump appeared to reverse his stance, and an agreement was reached between the Presidents of the United States and China to reduce tariff rates.  Consequently, the American tariff rate on Chinese goods decreased from 145% to 30%, while the Chinese tariff rate on American goods dropped from 110% to just 10%.  In this context, should we interpret that President Trump’s directive for Apple to limit its production expansion in India was influenced by China’s persuasion?

However, Apple Inc. has not yet issued any official statement regarding this development, indicating whether it will reduce its production in India in accordance with President Trump’s directive.  Nonetheless, there is a palpable apprehension that the Indian economy is increasingly becoming ensnared in Trump’s policy maneuvers.  Trump did not stop at Apple’s statement; subsequently, he claimed that India had proposed a 0% tax on American imports.  Although India’s Foreign Minister, Jaishankar, promptly refuted this claim, it remains true that, similar to the tariff rate agreement between the United States and China, discussions between India and the United States are also proposed.  In these discussions, will India be able to persuade the United States regarding its stance on tariff rates?  Can India convince President Trump to reconsider his statement concerning Apple?  These questions are currently entangling both Indian politics and the economy.  It is imperative to clarify that the essence of Trump’s recent statement regarding Apple does not imply that Apple is ceasing its operations in India.

In 2017, when the ‘Make in India’ initiative was prioritized within the Indian economy and proposed as a visionary project aiming for significant advancements in the manufacturing sector, Apple was encouraged by various tax exemptions and numerous other incentives under the PLI scheme for electronic products introduced by the Modi government.  Consequently, Apple commenced its operations in India.  Currently, Apple manufactures products at three locations in India: two in Tamil Nadu and one in Karnataka.  Indian company Tata Electronics officially acquired Wistron and Pegatron, initiating production for Apple, while Taiwan’s Foxconn had already been operating in Tamil Nadu.  Additionally, there is a proposal underway to establish a new unit on 300 acres of land along the Yamuna Expressway in North India, aimed at expanding Apple’s production.  Following Trump’s recent statement, it is plausible that Apple may immediately halt the expansion of its new units.  It is also essential to clarify that, although Apple is an American company, its largest production occurs in China, followed by India.  In the current scenario, the ratio of Apple’s mobile and laptop sales in the American domestic market is 4:1, meaning that for every four products manufactured in China sold in the U.S., one product manufactured in India is sold.

Established in 1976 in California, USA, Apple Inc. is currently among the top three largest global brands.  Presently, approximately 164,000 employees work for the company.  Apple’s current networth exceeds $3 trillion, while India’s GDP is approximately $4 trillion.  This statistic underscores the necessity of having companies like Apple to provide global recognition to India’s domestic market.  Although India’s domestic market already holds a significant share in Apple’s global profits, which Apple itself would be reluctant to forgo.  According to some reports, the testing unit for the iPhone 17, Apple’s latest product, was to be transferred to India so that by the end of the June quarter or around the upcoming Diwali, 15% of it could be produced in India.  However, behind the scenes, China refused to send that testing unit to India.

Apple entered China around the year 2000 when China’s economy was undergoing significant transformation.  At that time, Apple was not receiving substantial encouragement to expand in the U.S., and due to the incentives provided in China, it considered expanding its business there.  Factors such as reduced tax rates, financial support, land availability, and a large workforce available at low costs contributed to approximately 18-20% of Apple’s production now occurring in China.  However, it is important to remember that the COVID-19 pandemic originated in China, which suffered the most globally and experienced prolonged 100% lockdowns.  Another aspect is that China’s economy has established a strong foothold in the American domestic market, diminishing America’s global position compared to China as opposed to other countries.  In this context, when Trump began his second term, it was anticipated that he would target China.  This can also be understood as Apple planning to transfer 50% of its production from China to the Indian market due to this agreement.  However, amidst all this, Trump’s reversal has positioned the Indian economy as an innocent party caught in the economic diplomacy trap between the U.S. and China, with no clear path currently visible to extricate itself.

In conclusion, if Apple does not proceed with its proposed production expansion in India, it will have several adverse effects on the Indian economy in the future.  Primarily, it will diminish the global reputation of India’s ‘Make in India’ project.  The lack of expansion by Apple will also reduce employment opportunities for Indian youth, and the dream of the Indian economy reaching the third position in the GDP race will be further delayed.

Dr. P.S. Vohra is a Writer, Columnist and Financial Thinker.Views are personal