Regardless of the topic, I spent most of 2024 having ‘what if’ conversations. We were waiting to find out who would win the U.S. Presidential election–and therefore whose policies would dominate business decisions in 2025 and beyond.
One of the most compelling conversations I had was with Samir Kapadia, Managing Principal at Vogel Group and Founder and CEO at India Index. He joined me to share his expertise on global trade, but more specifically, India’s manufacturing capabilities and how their ascendency as a global trading partner is being watched as companies look for alternatives to China and nations flush with Chinese investment.
I reached out and invited him to return to the show to get a sense of how a second Trump presidency is going to affect trade policy, supply chain decisions, and global manufacturing potential.
Inner Circle of Trade
Since the election, we’ve heard a number of probable policy announcements and position appointments from the upcoming Trump administration. One that supply chain professionals should keep their eyes on is the appointment of Howard Lutnick as the Secretary of Commerce.
That appointment has caused a bit of confusion–not because of his experience or background– but because Mr. Lutnick has claimed he will be leading policy for not only the Department of Commerce but also for the U.S. Trade Representative with Jameson Greer as proposed leader of the USTR. The reason for confusion? That is under the Executive Office of the President. People are wondering if the USTR will be consumed under commerce.
Samir offered his own prediction for who will really run that agency. “I don’t think the vision for trade policy, frankly, is going to come from Mr. Lutnick or Mr. Greer. It’s going to come from inside the White House through someone who might be leading, say, The Office of Trade and Manufacturing, or potentially another member of Trump’s inner circle that hasn’t been announced yet.”
While we wait to see who controls those policies, one thing is very clear: there has been plenty of noise about tariffs.
Tariffs Will Transform Supply Chains for Years to Come
We’re all aware that Trump has discussed imposing tariffs on Mexico, Canada, China, and even European countries, potentially in response to a recent lack of reciprocity. After Canada and Mexico did not abide by the new USMCA agreement from Trump’s last term, the lack of inequity–for example, brought on by Mexico exporting more than 700 percent of steel over historical averages–has angered the incoming administration.
While many supply chain teams may feel anxious about where these tariffs will be applied, Samir feels they offer an opportunity for better supply chain practices. “Trump wants the producers and the manufacturers and the assemblers to get smart about where they’re getting their stuff.”
Some heads of state, like Indian Prime Minister Modi, are ready to sit down with the incoming administration and make deals. Others, like Canada, France, and Germany, are ousting their heads of state in favor of people who can help figure out how to shape trade policy going forward.
Samir’s point about dealmaking had me admitting that I keep reminding myself, “sometimes a tariff is a tariff, and sometimes a tariff is just the first volley in what Trump expects to be a lot of back and forth.”
Samir agreed, pointing out that we need to follow the money, seeing where China has foreign direct investment and is setting up shop in countries not subject to these potential tariffs.
“The Department of Commerce, specifically the Bureau of Industry and Security is very aware of these brazen trade circumvention strategies, meaning China's going to get out of being subject to these tariffs or to be part of that reality by just investing in another country that's not subject to it. U.S. corporations and European corporations are using that as an advantage. I think, in the long-term, that is not going to afford you the right to be on the right side of the trade.”
Trade is no longer the simple “I export this much, you export that much” system from decades ago. Concerns over national security, the environment, and labor have led to tariffs being used almost as safety guards to improve reciprocity.
Still recognizing that the rationale behind tariffs may change, Samir feels “The overwhelming arithmetic brings some sanity to the process. For anyone in supply chain, understanding the data and seeing where that’s possible is going to be much more instructive than just reading every tweet.”
As there continues to be distrust between this administration and countries like Vietnam and Mexico, other countries are poised to become favored in the eyes of the United States–namely India.
India Has the Opportunity to Seize Manufacturing Volume
When I asked Samir if he thought India was ready to seize the opportunity of taking on the volume from China or Chinese-invested companies on the existing timeline, he didn’t hesitate.
“Do I think they can achieve it? Yes. On the timeline? No.”
Citing a few challenges related to trade regimes, infrastructure, and labor, Samir offered a possible solution in the form of joint venture agreements. He brought up India’s JSWGroup entering into a joint venture agreement with U.S.-based Shield AI, as well as Apple’s investment across the value chain.
“People are not going to be going to India for China plus one. They’re going to be going to India to sell to Indians. That opportunity is…still very much a valuable part of the decision tree.”
Seeing the connection between the private and public sector, I offered, “It's almost like if left to their own devices, they will make the improvements and the investments that the rest of the world is looking for. But it's going to take too long. Our attention span is going to move on.
You need somebody that experiences a shock to the system, assuming it's successful, that then goes and says, ‘Hey, everybody, this is what we need to do based on what I learned.’ Having several of those things go on disconnected, but on the same timeline, that might be the kind of situation where involvement from the outside could actually accelerate the pace of change.”
Samir agreed and brought up the boost in Indian government subsidies that have gone into foreign direct investment–providing 50 percent cost share for new factories.
“India is starting to get into that and they're putting their money where their mouth is. If they're able to execute upon a free trade agreement or a pseudo free trade agreement...then that would create the fluidity to buoy all of those ships in that harbor.”
As we closed out the conversation, Samir left us with some final thoughts.
“Follow the money and look for reciprocity. 2025 will be a year for finding supply chain harmony in places outside of geographies like China.”
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