Donald Trump's tariff deals: End of the beginning in global standoff

Many experts thought that Mr Trump's aim was to lock China out of the global trade chains by striking major deals with big, long-term trading partners and allies. They were wrong

Last week, American President Donald Trump fired a salvo against Apple Chief Executive Officer (CEO) Tim Cook, demanding that iPhones be made in the United States (US), 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 $500 billion in US investment. In 2024-25, Apple churned out 40 million iPhones in India, worth $22 billion, with 32 million units ($17.5 billion) exported to the US, Europe, and West Asia. By 2026, the tech giant aims to assemble all US-bound iPhones here, scaling up production to 80 million 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, South 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

  Mr Trump’s stream of absurd and chaotic pronouncements — from a tariff rate that was based on trade surplus percentage to punitive tariffs even on remote islands inhabited only by penguins — has violently shaken up supply chains, trade relations, and the unit economics of businesses. Countries were given a 90-day ultimatum to negotiate, prompting a frantic scramble to decode Mr Trump’s intentions. They had to also figure out what they were suddenly guilty of and how best to negotiate with the US within that timeline. Many experts thought that Mr Trump’s aim was to lock China out of the global trade chains by striking major deals with big, long-term trading partners and allies like Japan, Germany, and South Korea. They were wrong. 

  One month later, only two agreements have materialised: One with China (a $295 billion trade-surplus foe) and another with the United Kingdom (a modest $12 billion surplus ally). Trade deals with the European Union (EU) will prove extremely complicated and are nowhere near in sight: Mr Trump calls the EU “a bigger cheat” than China. Japan is in confrontational mode. There is no deal in sight with Vietnam, a major transshipment hub for Chinese exports to the US. Deals with Canada and Mexico are in 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. Mr Trump is not trying to balance his trade books alone. If he did, countries could very well try to reduce their trade deficit at least partly through imports from the US of products of high volumes (oil and gas) and high value (defence and high-tech). He wants both trade deals and reshoring. But EU countries are struggling with poor growth, declining population, and high social costs. Flooded by Chinese imports, they can’t shrink their manufacturing base any further. Developing countries need to pull millions out of poverty. The best way to do it is through manufacturing, which alone is scalable and can thereby create massive employment, which agriculture cannot. Services can make a dent in unemployment only 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 that is needed for precision products like assembling iPhones; a tight supply chain of component suppliers (for chips, displays, camera modules, etc) on a par with China, Taiwan, Japan, South Korea, etc; and manufacturing ecosystems (specialised tooling, logistics support, subcontractors, 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 of 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 trade wars.

 

The writer is editor of www.moneylife.in and a trustee of the Moneylife Foundation; @Moneylifers