News of the week summary - 27/04/2025

Apple to produce all iPhones in India

Apple is preparing to move the assembly of all iPhones sold in the U.S. to India by as early as next year, a significant reconfiguration of its global supply chain. This decision marks a dramatic acceleration of Apple’s diversification strategy, as it seeks to shield itself from rising geopolitical and economic tensions, most notably, the fallout of the ongoing U.S.-China trade conflict.

The immediate trigger behind the shift is the resurgence of U.S. trade protectionism. Former President Donald Trump, who is again running for office, imposed steep tariffs on Chinese imports, including electronics. Though smartphones received a temporary reprieve from the highest tariffs, they are still subject to a 20% import duty when sourced from China. In contrast, the tariff for Indian-made devices (currently 26%) has been paused amid trade negotiations between the U.S. and India. Apple is hedging its bets that this preferential treatment could continue or improve under a new bilateral trade agreement.

Beyond tariffs, Apple is also grappling with broader supply chain risks stemming from its overreliance on China, including political uncertainty and pandemic-related disruptions. For nearly two decades, Apple’s production ecosystem (especially final assembly) has revolved around China, primarily through partnerships with manufacturing giants like Foxconn. But this concentrated footprint has become a vulnerability. Shifting a large portion of iPhone production to India is a strategic move to decentralize risk and gain greater operational flexibility.

India, in turn, is emerging as a viable alternative manufacturing hub, thanks in part to government incentives and the efforts of local partners like Tata Electronics and Foxconn. Assembly, the final stage of putting together the hundreds of components that make up an iPhone, has already begun to scale in India. Still, Apple remains heavily dependent on Chinese suppliers for the parts themselves, so the transition is more about rerouting final production rather than complete decoupling.

If successful, this move will double Apple’s output in India and allow the company to source more than 60 million iPhones annually from the country by 2026, matching the entire U.S. demand. This would be a significant leap for India’s role in global tech manufacturing and a strategic milestone for Apple as it retools its supply chain for a more multipolar world economy. For financial markets, the development reflects growing corporate adaptations to geopolitical risk—something that could influence the investment landscape for years to come.

Tensions escalate as China demands full tariff rollback before trade talks

China has delivered one of its clearest and most forceful responses yet in the ongoing U.S.-China trade standoff, publicly demanding that the United States cancel all unilateral tariffs as a precondition for any trade negotiations. This statement from Beijing not only rejects claims by former President Donald Trump that dialogue is underway, but also signals a hardening of China's position in a conflict that has increasingly strained the economic relationship between the world’s two largest economies.

Since early 2024, the U.S. has raised tariffs on Chinese goods dramatically, up to 145% in some cases. These are taxes imposed on imports with the goal of making foreign products more expensive, thereby encouraging domestic consumption and penalizing what the U.S. sees as unfair trade practices. China has retaliated with tariffs of its own, escalating the trade war in a tit-for-tat manner. Such trade wars tend to raise costs for consumers and businesses, distort global supply chains, and reduce overall trade volumes, posing risks to economic growth both domestically and globally.

China now asserts that it will not enter into negotiations under what it sees as coercive conditions. The rhetoric from Beijing emphasizes equality and mutual respect, rejecting what it calls “economic bullying.” Officials have repeatedly invoked the Chinese proverb “he who tied the bell on the tiger must untie it,” underscoring their belief that the U.S. must make the first move to ease tensions, since it initiated the tariff measures.

Meanwhile, despite Trump’s assertions that progress is being made and that tariffs will soon come down “substantially,” Chinese officials have dismissed such statements as “fake news,” denying that any substantive talks have occurred. The confusion is further compounded by ambiguous remarks from Trump, who claimed meetings had taken place but offered no specific details.

U.S. Treasury Secretary Scott Bessent has acknowledged that the trade war is not sustainable and hinted at the need for mutual de-escalation. However, the White House has maintained that tariffs will not be rolled back unilaterally. This deadlock raises the risk of what economists call “decoupling”, a scenario in which the U.S. and Chinese economies disentangle from one another in terms of trade, investment, and technology. Such a move could have long-term implications for globalization, supply chains, and geopolitical stability.

At its core, this episode reflects a broader shift in the global economic order, where trade policy is increasingly used as a tool of geopolitical leverage rather than cooperation. For investors, businesses, and consumers, the lack of clarity and rising tensions add to uncertainty, particularly in sectors like electronics, manufacturing, and global logistics, which are deeply exposed to cross-border dynamics.

Germany slashes growth forecast to zero

Germany has cut its 2025 economic growth forecast to zero, marking a stark warning about the deepening impact of global trade tensions, particularly those stemming from U.S. President Donald Trump’s tariff-heavy approach. The revised figure, down from a previously expected 0.3% rise in GDP, underscores mounting concerns in Berlin over the fragile state of Europe’s largest economy.

This downward revision follows two consecutive years of economic contraction: Germany’s GDP shrank by 0.3% in 2023 and 0.2% in 2024, representing the most prolonged slump since World War II. The German economy, long dependent on industrial exports and global trade stability, has been hit especially hard by tariffs and global uncertainty.

The immediate cause of Germany’s gloomier outlook is the new U.S. tariff regime. President Trump imposed 20% “reciprocal” tariffs on EU goods, later easing them to a temporary 10% rate during a 90-day negotiation window. However, this still presents a significant challenge for Germany’s manufacturing and automotive sectors, which form the backbone of its economy.

German Economy Minister Robert Habeck, who is soon to leave office, emphasized the need for swift resolution, warning, “The German economy is once again facing major challenges due to the unpredictable trade policy of the United States.”

Friedrich Merz, poised to become the next German chancellor, is planning a €1 trillion stimulus strategy focused on infrastructure, defense, tax breaks, and deregulation. Analysts believe this could revive growth in the medium term, though it won’t cushion the immediate hit from falling exports and dampened business sentiment.

While the German government expects inflation to ease to 2% in 2025, it acknowledged that U.S. tariffs could indirectly suppress inflation further if Chinese exporters divert goods from the U.S. to Europe. This would increase supply and potentially lower prices, but would also put pressure on European manufacturers already grappling with sluggish demand.

There’s cautious optimism for 2026, with projected GDP growth of 1%, driven by a rebound in corporate capital investment. But this depends heavily on geopolitical developments and Germany’s ability to implement long-overdue structural reforms.

US stocks rebound after Trump pledges to keep Fed Chair Powell

U.S. stock markets rallied late in the week following President Donald Trump’s assurance that he has “no intention” of firing Federal Reserve chair Jay Powell, a remark that helped ease investor fears about the independence of the central bank, a concern that had roiled financial markets earlier in the week.

The S&P 500 rose 2.3%, with earlier gains briefly topping 3%, while the Nasdaq climbed 2.6%, helped by relief across the tech sector. European equities also edged higher on the back of the news, amid ongoing volatility.

Trump’s comment came after yet another critique of Fed interest rate policy, which he believes remains too tight. But his acknowledgment that Powell’s job is safe gave markets a temporary boost. Still, analysts cautioned that trust in the Fed’s independence had been undermined.

This is the latest chapter in a tense standoff between Trump and Powell, with the former repeatedly pressuring the Fed to cut rates more aggressively to support economic growth—especially amid his expanding trade war with China.

Markets also reacted to a possible softening in trade rhetoric after Trump suggested tariffs on Chinese goods could “come down substantially.” However, this optimism was tempered when Treasury Secretary Scott Bessent clarified that any de-escalation must be mutual, pushing back on speculation that the U.S. might unilaterally roll back tariffs.

“Break between the two countries on trade does not suit anybody’s interests,” Bessent added, while reiterating that China must also act to lower tensions.

Trump has slapped 145% tariffs on Chinese goods, with Beijing retaliating with 125% duties. Despite the hostile environment, Trump has continued to express interest in a trade deal, though China insists the U.S. must move first—and has ruled out high-level talks for now.

The stock rebound follows weeks of sharp market losses, driven by Trump’s surprise “Liberation Day” tariff hikes. The S&P 500 remains down more than 8% year-to-date, while the Nasdaq has lost 13% amid broad selloffs in tech stocks.