Despite immense pressure from US President Donald Trump, iPhone-maker Apple Inc. is unlikely to move its production line out of India and relocate it in the United States even as the Cupertino-based multinational is witnessing its cost of production coming down for its smartphones by 60 per cent compared to the U.S. market, said Mukesh Aghi, President and CEO of Washington DC-based US-India Strategic Partnership Forum (USISPF).
“Tim Cook, the CEO of Apple, has gone down and showed to the president (Donald Trump) that if they manufacture the iPhones in the U.S., the cost to the consumer is going to be $3,500. Studies have shown consistently, for the US companies when they manufacture outside the US it is 60% cheaper. And so I don’t think Apple will basically move that manufacturing from India into the US,” Aghi told StratNews Global in an exclusive interaction over videoconferencing.
He highlighted that Apple has committed to invest $500 billion in advanced manufacturing, in which India features prominently.
India and the United States are currently engaged in negotiations for having an interim trade deal that seeks to give more market access to American goods, especially in the agricultural sector. Once the deal is signed, both sides will go on to conclude a mega trade deal encompassing trade in goods, services and investment, which will focus more on eliminating the non-tariff barriers.
However, Aghi said, it is not clear whether the interim deal will lead to the removal of the 10 per cent baseline tariff that the U.S. has imposed on all Indian imports.
“If it stays, I don’t think it has much impact on India’s exports because we saw with a 10% baseline also exports are going up from India into the United States. And the same way India will also put 10%. So it will be a reciprocal agreement between the two countries having 10% tariffs on each other’s goods exports. So, it kind of flattens out the arrangement,” he said.
On Monday, Trump said the deal with India will be signed “soon” even as the trade negotiators on both sides are believed to have presented a draft copy of the agreement to the U.S. President for his approval.
“We’ve made a deal with the United Kingdom, we’ve made a deal with China, we’re close to making a deal with India,” Trump told reporters at the White House while meeting Israel Prime Minister Benjamin Netanyahu even as the US President announced new reciprocal tariffs on 14 countries — including Bangladesh, Malaysia, Japan, Cambodia and South Korea.
According to Aghi, both countries are likely to sign the mega trade deal “by fall” when India is expecting a visit by President Trump in order to attend the Quadrilateral Security Dialogue (Quad) Summit, which will be hosted by New Delhi.
The Trump administration will need approval of the U.S. Congress for the ratification of the comprehensive trade deal with India.
Aghi also pointed out that, on the other hand, when it comes to India’s export competitors, when goods will be exported from China into Vietnam and then to the US, then the tariff jumps to 40%.
“So I think there is a strategy to basically punitively go after China, on the tariff side, directly or indirectly. And that’s where India benefits,” he highlighted, adding that the Bilateral Trade Agreement with the U.S. will provide more market access to Indian pharmaceuticals, gems and jewellery as well as energy products.
On Monday, Trump announced the decision to impose a 25 percent tariff on goods from two of its closest allies Japan and South Korea, with effect from August 1.
Aghi also feels that a potential trade deal between the United States and China will take time and it will not impact Indian exports.
“China’s relations with the U.S are very complex. China will prolong the discussion. It will make every effort to tire the U.S negotiators and ensure that at least, the process continues … So we don’t expect trade deals happening with China because it’s not just about trade between the US and China, it is also about geopolitics,” said Aghi.
“It’s about dominance. It’s about controlling the manufacturing industrial base itself. So we do expect, at least India will sign a trade deal, whereas China will be a challenge,” he added.
