Business leader warns Trump may eventually do a deal with China, urges Delhi to marry America First with Atmanirbhar Bharat
Mukesh Aghi is the chair of the US-India Strategic Partnership Forum (USISPF). Aghi, who shares close relationships with top decision-makers in both countries, has played a key role in deepening India-US ties as he has helped governments, and the private sector build on convergences.
In a recent conversation with HT at his office in Washington DC, Aghi spoke about Donald Trump’s return to power and its impact on the world and India.
How is Trump 2.0 going to be different from Trump 1.0?
Mukesh Aghi: Trump 2.0 will avoid all the mistakes he made in 1.0. He is going to come with a clearly-defined agenda. He will come with clearly-defined people and he will have an execution plan which is 30, 60 and 90 days. So, you will see a Trump administration which won’t be floundering but will focus on execution and efficiency.
In terms of the policy focus, Trump has spoken about mass deportation, tariffs and ending wars. What are the big changes that you expect?
– The US spends roughly a trillion dollars on its defence budget. It has around 750 bases around the world. Trump is going to question that. Do we need these bases? Do we need to be out in all these wars? I think you will see a massive shift taking place from that perspective.
Second, he wants to create jobs at home, and he thinks that the best way to create jobs at home is to stop importing and start manufacturing. So, he will put tariffs. The biggest supplier of goods to the US is China. So, he will put higher tariffs on China hoping that some manufacturers will move back and that’s going to create jobs. There will be challenges because all indications are once you put tariffs, it drives inflation. Once it drives inflation, the Fed will keep the interest rate high. When you keep the interest rate high, the dollar gets stronger. So, it gets much more expensive to export from the US side also. So there has to be a balance.
You will see a stress point happening with China because the Chinese economy is not what it was during first Trump term. That time, it was booming. Now, it is struggling. Real estate assets are in a downward spiral. Its deficit has gone up. China is at a weak stage economically at the moment, but it’s a country which has its own ambition to be the dominant power.
Trump’s China approach: “There will eventually be a deal”
Trump’s appointees for NSA and Secretary of State have had very strong and critical views on China. His vice president has spoken about how China has taken away jobs from middle America. This is what his base believes, and this was the core of his campaign in both 2016 and 2024. At the same time, Trump has taken a U-turn on TikTok ban. Elon Musk, who has strong business interests in China, in his orbit. Do you think that the Trump administration is going to take a strong line on China, or do you think that there will be some escalation of tensions followed by a possible deal?
– We have to understand Trump’s endgame; create jobs here in America. And he feels creating jobs here is mainly through manufacturing. So, to bring back manufacturing, he will raise the tariff. He is going to put a lot of pressure on US companies to relocate their supply chain. He’s going to put a lot of pressure on the Chinese. And at some stage when you see a massive disruption happening with the high tariffs, it’s going to have an impact on US companies immediately because complex supply chain comes from both US and also international markets. So, if you start putting tariffs on them, US exports become expensive. So, he will have to make a deal.
Now in the case of China, yes, if the Chinese put a good value proposition together on the table, he will make a deal. But you have to understand that the last time he made a deal where China committed to $200 billion procurement of goods, nothing was bought. So, he is very, very conscious that whatever the Chinese say, they may not do what they say. So, I think there’ll be a lot of skepticism on part of Trump. But he will make a deal eventually.
So, if China offers him a sweet economic deal, does Trump give China strategic space in the region and allow China to do what it wants to do, say in Philippines or in other parts of the region? Are you apprehensive of that kind of deal?
– It could happen. You have to understand if there is a deal which benefits Trump and United States, he will make a deal because he will look at not the long-term, but he will look at short-term to mid-term. How does it impact him, his legacy and also the United States itself. So, if the deal is good enough, I think he’ll take it.
How is the immigration issue going to pan out given the promise of mass deportation and willingness to impose national emergency and the use of military powers?
– You have two kinds of immigration, legal and illegal. Illegal is mainly blue collar workers who are doing low-end jobs from picking up berries in farmland to washing dishes and restaurants. There is a lot of pressure for Trump to bring that under control. We have around 16 million illegal immigrants in the country and so that has to be dealt with. Now can you basically use military to drive that? Yes, there’s a possibility, but then you’re going to have massive chaos. There’ll be lawsuits, so that’s going to slow down the process.
Then you have legal immigration. We have a shortage of skilled resources. If you want to bring manufacturing back, you have got to figure out how you’re going to basically bring resources. Take the Chips Act and all the semiconductor plants coming into Ohio, Arizona and New York. The biggest challenge is not the capital, it’s the people, it’s the talent. And so, we have to sort that out through legal immigration. So hopefully the Congress will come to the table. With Republicans in majority in both the Senate and the House, and with the president Republican, they’ll make a deal. Look at the talent which is graduating from STEM programmes here who can be, on day one, tax-paying citizens, why not grab them? So, I see a potential possibility of having a deal on the legal immigration side and chaos on the illegal immigration side.
The US-India track: “Flip the game plan, position India as US plus one”
Let me move to India. India managed the first Trump administration better than most other countries. There has been great bonhomie between the prime minister and the president elect. They were also on a call immediately after his election. The optics seem right. What are the possibilities and opportunities you see for the relationship and what are the challenges?
– So, you have to look at it geopolitically. You have a country which has 1.4 billion people. It’s a country whose economy is growing at 7-7.5%. It will grow to a five trillion dollar economy by 2027. The purchasing power of citizens is going up by 15% annually. And we are seeing a nation which China will never treat as an equal partner and is going to stand up to China. So, there is a clear geopolitical alignment between US and India to deal with China. That’s one aspect.
The second aspect is economic. You have a large number of Fortune 500 companies which have their manufacturing in China. As the stress point goes up, as tariffs come in, they have to decrease the supply chain dependence. So, the question really becomes is do they bring that to US, or do they take it elsewhere too? And I think India becomes a potential option from that perspective because it’s not just only about building in India but also going after the Indian market. The classic example is Apple. Apple today is exporting 25% of its iPhone 16, but Apple’s domestic revenue has crossed $5 billion.
So, companies are saying, okay, I will do what you call as the China plus one strategy. That is, I will look for an alternative. But you have to understand that US companies will not leave Chinese market. What they will do is have enough manufacturing in China for the Chinese market but go to other geographies to look at for the market of that geography or the rest of the world.
But I think the other factor which you have to keep in mind is it is no longer a China plus one strategy. I think what India has to do is the US plus one strategy. Flip the whole game-plan and say, okay, how do I integrate myself into the global supply chain where I build components in India and those components are finally get assembled in the US. Global supply chain is tied to national security now and India is a geopolitical partner from a Quad perspective.
So, it will now become secure sourcing, no more friendshoring, no more outsourcing. There will be secure sourcing partnerships, with countries where you have a strategic geo-alignment and at the same time can show how they can support you on a US plus one strategy. So, I see the trend taking place very, very fast, especially after the Inauguration.
That’s very interesting. So how does India pitch to American companies to come and invest in India, when Trump is going to turn to them and say, invest in US?
– Well, you can’t move 100% of the manufacturing line to the US. India can talk to, say, a chip company and say we will do all the design and then do part of the fabrication and then do the packaging and testing in the US itself. So overnight, you cannot move 100% of your manufacturing to the US. You need partners who are willing to play by the rules and be part of the integrated global supply chain. And that’s where India becomes critical. So, India has to basically pitch and position the US plus one strategy and India becomes the plus one in supporting Trump’s ambition of bringing the manufacturing back to the US
The trade battles: “India should proactively propose a trade, tech, supply chain deal to Trump”
That strategy can work if the second component works — trade. If you want smooth and secure supply chains from India to US, you need a trading arrangement that is smoother than what exists right now isn’t it? So, two questions. One, what do you see the Trump administration doing? They have already said they’re going to impose 10 to 20% tariff across the board that includes India. And two, what do you think India should do to maybe preemptively deal with this issue or if tariffs are imposed then subsequently deal with this issue?
– India should not have a knee-jerk reaction. I think India should look at how do you basically integrate this relationship in every aspect. Don’t have insular deals. Combine three aspects. One is technology transfer, continue with that; two, make a trade deal; and three, become US plus one manufacturing in the supply chain. So, what happens is if India makes component in a global supply chain; there’s zero duty coming to the US. It is three different plays. You got to combine them into one and work with the Trump administration from that perspective.
So, trade, investment and technology together?
– Absolutely.
And you think India should make a proposal of that sort of a comprehensive economic deal?
– Be proactive. Don’t be reactive because the moment you start being reactive, it becomes more complex. Put a pitch on the table once the administration is announced. I think there is an issue of speed. You have to understand that Trump is going to come with a game plan. He’s going to come with the policies. He is going to be with a team whose job is to execute very, very fast with speed. So, India has to do the same thing, have a game plan, come to the DC and execute from that perspective.
I remember in the first Trump administration, India was very keen to do a mini trade deal and was willing to basically go beyond where it has ever gone on the agriculture side or on some other aspects. I think today India is much stronger, with a much more confident political leadership. And so, I think India can take the lead and provide the leadership and make a package deal with the Trump administration.
The tech synergy: “Musk’s demand on spectrum is a stress point”.
Export control restrictions have inhibited the deepening of tech ties. Do you see Trump with his very fiercely American nationalist orientation and political commitment, opening up technology to a partner like India?
– I strongly believe this is a fantastic opportunity for India to work with the Trump administration and see how you can streamline ITAR (International Traffic in Arms Regulations) because that is the biggest constraint of technology exports to the rest of the world. I am not saying open it for the rest of the world. But see how you can streamline that because Trump is going to come in with a sledge hammer and make a change in this town with policies and processes which has hampered the growth of the US economy and US exports. So, I think it’s a very good opportunity for India to create awareness that this is one of the impediments which stops trade between the two countries.
