Political Bluster Vs Factory Reality

THE TAKE 

Trusting Politicians Like Trump With Global Trade Order Can Be Catastrophic

Two weeks ago, the White House insisted that all the beautiful iPhones would be made in the US, and millions of jobs would be created state-side for phones and much more. 

This week, it appears that the dream is on pause. As is presumably the golden age, these tariffs were supposed to herald in the United States.

While there is no way to predict whether America’s import tariffs on Chinese imports will land at 30%, the present rate after the latest deal, it does feel like it is unlikely to go higher. 

Moreover, the consensus seems to be that most tariffs will eventually converge around 10%, which is also likely to be on the higher side.

Even a 10% tariff is four times what it was earlier in the US, so exporting into the US will not be easy and will strain exporters, particularly industries working on thinner margins, like apparel.

Foiled Plans

The problem is not the tariff rate. It is about what it does to plans.

Several companies had rushed to announce manufacturing plants in the US.

Global MNCs like Eli Lilly, Johnson & Johnson, Apple, TSMC, Novartis and Roche, all announced major investments in the US after they tried to beat the Donald Trump rap.

In February, US president Trump warned drugmakers in a private meeting that tariffs were coming and said companies should hustle to move overseas manufacturing to the US, Bloomberg had reported.

Arguably, the CEOs of these companies would have taken calculated bets when announcing their investments — war gaming a business case scenario where the tariff threat fades away or is watered down.

But this is a capitulation that they were surely not prepared for, because in some ways, they had little choice but to announce those plans and perhaps pray they would have time to see it through, if at all.

Compared to assembling phones, biopharma manufacturing appears to have more value-added potential in the US, at least going by the investments.

But we don’t know.

Trade Isn’t Everyone’s Cup Of Tea

The problem is that the ideology of bringing manufacturing back has evidently been hijacked by the deal.

The ideology was clear in its scope and definition.

In a statement that must stand out for its remarkable lack of forward thinking, US Commerce Secretary Howard Lutnick’s told CBS's "Face the Nation" that there will be an “army of millions and millions of people screwing in little, little screws to make iPhones” in the US as a result of Trump’s trade deals.

But if the deal could override the golden age promises of armies of millions screwing in little screws, it is not clear whether ideology was ever in the reckoning.

Was it always a Trump art of the deal where a tariff threat would be used to negotiate better terms for the United States?

If so, what happens to the citizens who were hoping to see scores of new factories with new jobs humming away in their respective states and regions?

Maybe these new shiny factories were in the consideration set, maybe they never were.

The events of the last few months have been illustrative.

For one, they tell us that some things in the manufacturing supply chain are tough, if not impossible at this stage, to move around, including back to the West from the East.

Like smartphone assembly by giants like Apple, who were already cutting side deals, another outcome of high tariff walls.

Second, trade is a tricky subject, and its nuances are not understood by everyone. 

Who Will Suffer? 

The idea that trade deals hammered out in distant lands can have a catastrophic impact on businesses and livelihoods is only now sinking in.

Even the current deal with the UK and China that America has signed on, will take months, if not longer, to detail out.

India’s own deal with the US is yet to be formalised, though we heard promises of it coming in a week. That was two weeks ago.

The other lesson, as the Trump-friendly Wall Street Journal also reminds us, is that the markets have to be respected. 

Whether it is financial markets, including stocks and bonds or trade markets, all have rejected the Trumpian vision of tariffs making America great again, if that indeed was the vision.

The lessons from this non-stop, self-induced economic roller coaster are for all countries to learn. 

It is not the millions who would tighten screws on iPhones; rather, it is that the screws would tighten on them.

CORE NUMBER

Rs 3,700 crore

This is the expected investment for a new semiconductor manufacturing plant approved by the Union Cabinet on Wednesday. The sixth semiconductor facility in India will be set up near Uttar Pradesh’s Jewar airport in the Yamuna Expressway Industrial Development Authority (YEIDA) region. A joint venture between IT company HCL and Apple supplier Foxconn, the facility will produce display driver chips for mobiles, laptops, and cars, with a capacity of 36 million units per month. With over 270 institutions, 70 startups designing semiconductors, and global giants like Applied Materials and Lam Research expanding in India, the sector is rapidly moving toward self-reliance.

—🇮🇳📉 Wholesale Prices Cool Off. India’s wholesale price index (WPI)-based inflation — an indicator of prices at the production and wholesale level — eased sharply to 0.85% in April 2025 from 2.05% in March, largely due to falling fuel and primary commodity prices. The WPI tracks bulk price changes in sectors like mining, manufacturing, and agriculture. Crude oil and natural gas prices declined by 5.31%, while non-food articles fell by 1.78%. Primary articles, which make up over 22% of the WPI basket, saw a 0.11% monthly dip. Meanwhile, food prices inched up 0.36% and mineral prices surged 7.81%, offsetting deeper declines.

—🤝🏻 Mega Credit Coup! On Wednesday evening, Indian conglomerate Shapoorji Pallonji Group signed a $3.4 billion debt deal — India’s largest private credit agreement. According to Bloomberg, major investors include Ares Management, Cerberus Capital, Davidson Kempner, Farallon Capital and Deutsche Bank, which is also acting as the sole arranger and trustee. The three-year, zero-coupon rupee bond offers a 19.75% annual yield with a 16% loan-to-value ratio. The deal highlights India’s booming private credit market, fueled by growing infrastructure needs.

—💸 e-Wallet Wake-Up Call! Following the collapse of BluSmart—India’s largest all-electric cab service—India’s central bank, the Reserve Bank of India (RBI) has begun reviewing digital wallets used by EV service providers, Bloomberg reported. BluSmart’s shutdown left users unable to access money stored in their app accounts, exposing vulnerabilities in "closed-loop wallets," which aren’t regulated like open wallets. RBI is now considering safeguards like mandatory escrow arrangements and extending prepaid payment norms to large closed wallets to prevent consumer losses in future platform failures, the report added.

—🍔🍕 McDonald’s, Domino’s, Do Well? Westlife Foodworld, which operates most McDonald’s stores in India, reported a 2x increase in its profit in Q4 FY 25, according to a Reuters report. Another Reuters report said that Jubilant FoodWorks, which runs Domino’s Pizza, also reported profit increase. McDonald's’ winning strategy was aggressively marketing its cheaper food options, while Domino’s’ was selling more online, in addition to delivering in 20 minutes. The Core had reported last year that starting Q2 FY24, most fast food brands had a negative same-store sales growth (SSSG) because of lower demand. But, it appears that trend has reversed — though Jubilant’s SSSG data isn’t publicly available yet. Both Sapphire (the parent company of Pizza Hut) and Westlife showed a 0.7% and 1% SSSG respectively.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas