By Tripti Lahiri

NEW DELHI -- When President Trump opened his first trade war on China in 2018, a company called Zetwerk was just beginning to connect global customers with Indian suppliers of things like sheet metal and precision parts.

Today, it has a network of more than 10,000 suppliers and seven of its own electronics factories. Its latest facility, making parts for washing machines and other appliances, opened in March.

The first trade war helped India rise -- and Trump's second one could be transformative, said Josh Foulger, the head of Zetwerk's electronics business.

"Is this India's moment?" said Foulger. "Yes."

With most Chinese exporters cut off for now from U.S. consumers by high tariffs, companies are looking for alternative places to produce and export to the U.S. -- adding up to a golden opportunity for India.

That doesn't mean India will take its chance. The world's most populous nation has long trailed not just China but also smaller countries with nimbler governments. The number of people working in agriculture dwarfs the number employed in manufacturing.

Global high-tech firms and retailers say India is a harder place to do business than China or Vietnam, owing to government red tape, restive labor groups and an often-punitive approach to compliance and taxation. Vietnam, a country of 100 million people, exports $50 billion more in goods to the U.S. than India, whose population is 1.4 billion.

Indian officials in New Delhi are signaling they plan to be more open to Western businesses and are moving for a quick trade deal with the U.S. The country wants to emulate what has made China the world's unparalleled manufacturing powerhouse by offering not just manual assembly of goods but also design, parts and other knowhow.

"We are looking at building the entire value chain in India itself," said Ekroop Caur, the secretary for electronics and information technology in the southern state of Karnataka.

For the moment, most Indian goods face only the 10% tariff Trump has imposed globally, and certain exempted electronics such as iPhones have no tariff. The tariff on most Chinese goods is 145% while those electronics items are subject to a 20% rate.

Apple is already moving to export more iPhones to the U.S. from India, and the country currently accounts for about 20% of iPhone final production, according to market research estimates.

India's election last year, in which Prime Minister Narendra Modi's ruling Bharatiya Janata Party lost its outright majority, sent a clear message that many voters were dissatisfied with job prospects and low wages.

India now has a critical window for opening up with no local or national election on the horizon for about a year, said Tanvi Madan, an expert on India at the Brookings Institution.

The moment could be as important for India as the end of the Cold War, when it fell into a financial crisis caused by the collapse of the Soviet Union, then India's largest trading partner. In response, India opened up to foreign investment and cut a plethora of rules and regulations known as the "license raj," sparking faster growth.

"India has always worried about what opening up to the world will do to it," said Madan. "It should be thinking about what the world can do for it."

India's foreign minister, S. Jaishankar, said this month that the upending of global trade had "focused our own minds on the need for correcting what I would call a certain skewed nature of our openness to the global economy."

Still, companies find India remains prone to regulatory flip-flops and head-scratching interpretations of tax laws, leading to penalties or lengthy legal disputes.

India has demanded $1.4 billion for back taxes going back 12 years from a unit of German automaker Volkswagen, and an equivalent amount as a penalty, alleging it misclassified shipments imported into India to evade customs duties. The company denies wrongdoing, and has challenged the order in court.

"You think about China 30 years ago and Vietnam now, you have government officials in their localities waking up every day thinking, 'How can I make it easier for companies to come here and invest?'" said an executive with a U.S. firm long active in India.

Yet smartphones offer an example of what India can do when it puts its mind to it. A decade ago, when India started focusing on building phones, its annual mobile-phone exports were only about $250 million. Now the figure is more than $22 billion, with Apple accounting for about three-quarters of that.

A factory in Karnataka operated by Taiwan's Foxconn is coming on line this year and will eventually add annual production of 20 million phones, rivaling Foxconn's flagship plant in the neighboring state of Tamil Nadu.

Officials say a network of suppliers is growing up to feed the final assembly. New York state-based Corning, which has long made scratchproof glass for Apple phones, plans to start production in Tamil Nadu this year.

Companies say smartphones are benefiting from the government's attention and support, including manufacturing subsidies. India said this month it would extend the subsidies to phone components it now largely imports, and it has upgraded the freight terminal at Tamil Nadu's main airport to address bottlenecks that sometimes left vehicles carrying products waiting on the highway.

Foulger, the executive who connects global companies with Indian suppliers, was the country head for Foxconn in India before joining Zetwerk last year. He said the country still needed improvement on the most important quality for a global supply chain: consistency.

His mantra is to plan ahead, which he said he often repeats when he hears a supplier citing a string of public holidays as the reason for a delay or a worker blaming Bangalore's notorious traffic for being late.

"All of these things have to be like this 128-piece orchestra working in sync to make this happen," said Foulger. "It's going to be a journey, it's going to take some time, but because of India's inherent strengths I think we will prevail."

Write to Tripti Lahiri at tripti.lahiri@wsj.com

(END) Dow Jones Newswires

Tanvi Madan, of the Brookings Institution, noted that India has only one state election taking place between now and next spring. "India Has a Golden Opportunity to Capture U.S. Business From China," at 11 p.m. ET on April 18, incorrectly described her as saying no state elections were taking place in that time frame.

(END) Dow Jones Newswires

April 19, 2025 04:03 ET (08:03 GMT)

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