
Mint Primer | How will Make in America impact India?

Summary
- US President Donald Trump has laid out a carrot-and-stick strategy to boost his plan to ‘Make in America’. Trump wants companies to either set up factories in America or, if they don’t, face higher tariffs on their exports to the US, he warned.
US President Donald Trump’s manufacturing push is a wake-up call for countries vying to be the next China. They need to get working. India, for instance, has to address issues such as logistics and a weak components ecosystem. Mint explains:
What is Trump’s manufacturing plan?
US President Donald Trump has laid out a carrot-and-stick strategy to boost his plan to ‘Make in America’. Trump wants companies to either set up factories in America or, if they don’t, face higher tariffs on their exports to the US, he warned. “My message to every business in the world is very simple: come make your product in America and we will give you among the lowest taxes of any nation on earth," the US president said in a video address to global business leaders at the World Economic Forum in Davos. Trump has proposed a 15% corporate tax rate for companies that make in the US.
What impact will it have?
In recent decades, global manufacturing has shifted to Asia, primarily China and, to a lesser extent, to Vietnam, Indonesia and Malaysia. They make everything from electronics to air cons, shoes to t-shirts, for global markets, relying on a complex multi-country web of suppliers. Hi-tech manufacturing, like chip-making, is already scaling up in the US. For finished goods, there’s adequate global supply. Unemployment is low and capacity constrained in the US. Contract manufacturers will be reluctant to shift base immediately as it entails fresh investments, and higher US labour costs may offset gains from sops.
Read more: India must wake up on basic R&D for technology before it gets too late
Is there value in contract manufacturing?
Global companies owning products and intellectual property (IP) outsource manufacturing to contractors. Nvidia designs AI chips in India and elsewhere, which are made by TSMC in Taiwan. Apple designs in California and makes in China, India, etc., via contract manufacturers. IP and product ownership hold more value than low-margin manufacturing.
Is it a wake-up call for Indian manufacturers?
Outdated technology, inconsistent quality standards, skills gaps, and complex regulations hobble Indian manufacturing. India spends just 0.64% of its GDP on R&D, impacting innovation, compared to China’s 2.4% and the US’s 3.5%. India’s logistics costs, at 14-15% of GDP, are expected to decline to 9% as targeted by the National Logistics Policy 2022, enhancing competitiveness. The government’s production-linked incentive (PLI) scheme is helping improve manufacturing, albeit slowly.
What are other Asian countries doing?
According to a December 2024 Niti Aayog report, India has seen limited success in capturing the ‘China Plus One strategy’, while Vietnam, Thailand, Cambodia, and Malaysia have become bigger beneficiaries. It noted that factors such as cheaper labour, simplified tax laws, lower tariffs and pro-activeness in signing free trade agreements have played a critical role in helping these countries expand their export shares. Now with the looming threat of US trade barriers, India must create ease of manufacturing.