• Iphone exports have contributed to a surge in U.S. Trade Deficit with India and in turn India’s trade deficit with other countries. India and USA should work together to enhance job creation, innovation and growth in their countries by playing to each other’s strengths whilst facing the Chinese challenge. 

Tariff of 25% from August 1 said U.S. President Trump plus a Penalty for buying Oil from Russia and probably Arms too. India runs a huge trade surplus with the U.S. made headlines in India and often referred to in Trump’s tweets. 

A learned economist said, “Trade is only merchandise. Current account includes services, remittances and primary income. Primary income is what the country earns on its foreign assets minus what it pays for its foreign liabilities.” Simply put a trade deficit takes place when a country imports more of merchandise than it exports.

This is the third in a series of articles on trade deficit with USA. One explained what is trade deficit? Two, looked at both the trade and geo political issues. What does U.S.A. want? What is President’s Trump’s approach and Implications? 15 IDEAS how India can respond. 

This article looks at trade deficit numbers over a three year period i.e. Fy25, Fy24, and Fy23. See table 1 below. Data hard to come by but given with sources. If slight error in data, ignore but focus on concept please. 

 Table 1 – India USA Trade Deficit FY 23 to FY25.                   $ Billion          

Data Sources - FY25 numbers courtesy Hindustan Times.

@ India Briefing.com

# IBEF.org I Phone exports rang louder due to PLI

$ Indian Tech Guide – Apple I Phone exports.

^ HDFCSKY.com – India US Trade Trends

Indiashippingnews.com–Half of Indian Exports to USA unaffected by new tariffs  

Comments on Table 1

1. Trade Surplus jumped from $ 27.7 Bn in Fy23 to 41.1 Bn in Fy25. Correspondingly, Apple Exports increased from $ 5bn to $ 17.5 Bn. So, Apple exports contributed to the rising trade surplus with USA but increased India’s deficit with others countries.

2. According to this paper dated 16-5-25 by Global Trade Research Institute, “Each $1000 iPhone carries the imprint of at least a dozen countries. Apple, through its software, design, and brand, claims the lion’s share of the value—about $450 per device. U.S. component makers such as Qualcomm and Broadcom add another $80. Taiwan earns $150 for chip manufacturing, South Korea adds $90 for OLED screens and memory chips, and Japan contributes $85, mainly via camera systems. Other countries like Germany, Vietnam, and Malaysia account for a modest $45 through smaller parts. 

So assembly of Iphones in India increases its trade deficit with other countries while enhancing surplus with USA. India makes app $ 30 on each Iphone assembled in India but the trade deficit takes a much higher value (say f.o.b.) for a phone that sells at app $ 1000 in the U.S. 

“And then there’s China and India. Despite dominating iPhone assembly, both countries receive only about $30 per device—less than 3% of its retail price. This final stage of production, while low in value, is high in employment. Around 300,000 workers in China and 60,000 in India work in iPhone assembly lines.” 

“This is precisely the segment of the supply chain Trump wants to bring back to the U.S.— not because it’s high-tech, but because it delivers jobs. Yes, the costs would be higher. In India, assembly workers make roughly $230 per month. In contrast, U.S. minimum wage laws in states like California mean monthly labor costs could rise to $2,900—a 13-fold increase.”

So if Trump ji wants Apple to produce in the U.S. he has to make U.S.A. competitive, be prepared to accept higher deficit with countries that manufacture Iphone parts.

On its part will Apple, by manafacuring in the U.S., accept lower profits that affects its share price.  One can argue that labour cost in Texas would be lower than California and complain of Apple’s lower tax pay-out because of its arrangements in Ireland. Those are problems for the U.S. government not India to resolve. Read   Profits at Apple’s subsidiary in Ireland rise to $69bn. Main non-US division pays $7.7bn in corporation tax but $20.7bn in dividends to California parent

3. APPLE exports from India have increased from $1.2 Bn in FY 22 to $ 17.5 Bn in FY25 (24-25). Why?

Post Covid19 and due to repeated muscle-flexing by China, the West decided to have a China+1 policy meaning that Western corporates would shift production to one more country, thereby reducing over-dependence on China. It was a geo-political and commercial decision.

Wonder why the government of India has not pointed this out. Geo-politics and trade go hand in hand. 

4. Adjusted for education etc, the U.S. has a surplus of $ 30-35 billion with India in FY25 (much lower if you remove IPhone exports). And the number of Indian students going to the U.S. can only increase, notwithstanding the impediments by the Trump administrations. More reservations in Indians means more students go the U.S.

For all the noise on U.S. tariff from August 1

1. The date for 25% tariff is now August 7 .

2. Surajeet Das Gupta in Business Standard on 4/8/25. “Up to August 14, 2025 mobile devices remain on the exemption list with zero duty.” 

3. Energy, automobiles/auto parts and pharma are excluded from the July 30 announcement by Trump – Riddam Desai, MD Morgan Stanley, MINT 4/8/25

4.  "In the generic drug market, India supplies nearly 47% of the pharmaceutical  needs of the US. If US shift manufacturing and API production to other countries  or domestic facilities, which will take minimum 3-5 years for meaningful  capacity. So, tariff may lead to drug shortages and price increase for American  citizens.” SBI Research Report Issue # 17, FY26 Date: 01-August-2025.  

Decoding U.S. India Trade Trends – courtesy HDFCsky.com

India exports to USA over 10 years.  

If Trump ji wants to make USA Great Again, the government has to find ways to make it attractive for U.S. companies to make local production profitable.

Chart 1 – India’s Top Exports to USA in FY 2024- USD Billion 

Chart 2 – India’s Top Imports from USA in FY 2024 

When we look at U.S. India merchandise numbers they should be adjusted for items 1 to 5 above. That will give a true picture of the trade, business and people relationship.

Also, the U.S. is no longer a manufacturing power like China. It is today more focused on promoting its dairy products, agricultural products and crude. India should seek to increase crude oil/LPG and maize corn to the extent it can. The relationship is strategic after all. 

India and USA should work together to enhance job creation, innovation and growth in their countries by playing to each other’s strengths whilst facing the Chinese challenge to their democracies. 

If the U.S. wishes to reduce its fiscal deficit/debt it should avoid taking part in, sometimes, senseless global wars. In India, we call such attitude DADAGIRI.  

Apple achieved an 11th consecutive quarterly revenue record in India, with iPhone sales estimated at $10 billion last year says this January 2025  . Surely, manufacturing in India has contributed to rising sales. This benefits shareholders of Apple and results in higher share price in USA.  MINT report    Read   India’s contribution to Apple’s global business doubles to 14%

Also read

1. USTR numbers on trade