Trump Raises Tariffs, But American Capital Is Voting With Its Feet
Despite Trump’s tariff threats, American capital is surging into India. Tech giants are investing billions, showing protectionism’s limits and confirming India’s growing pull for talent and opportunity.
The Gist
US investments in India surge despite tariffs
- American companies like Amazon and Microsoft are leading the charge with significant investments.
- Tariffs imposed by the Trump administration are failing to deter tech investments.
- This trend illustrates the limitations of managed trade in the modern economy, where talent and growth opportunities drive business decisions.
US president Donald Trump is busy erecting walls, but American capital has found a way to climb over them.
In just the past four weeks, US firms have committed more than $67 billion to India, a figure that roughly matches the average annual foreign direct investment inflows into India, even as trade and political relations between the two countries remained in limbo.
The contrast is stark.
On one hand, the Trump administration is doubling down on protectionism. As of August 26, the US imposed a 50% tariff on Indian imports.
And just this week, Trump threatened new levies on rice, a symbolic, though economically minor jab at New Delhi. Only 5% of India’s rice exports go to the US.
A bilateral trade deal, which could have halved those tariffs to 25% by mid-December, remains nowhere in sight.
Yet, on the other hand, the captains of American industry are aggressively stepping up their bets on the subcontinent.
Limits Of Managed Trade
Leading the charge are the “hyperscalers” Amazon, Microsoft, and Google, pouring billions into data centres and cloud infrastructure in India.
Amazon alone announced a $35 billion outlay on Wednesday, aiming to supercharge its Indian exports to $80 billion and support 3.8 million jobs by 2030.
Microsoft announced a $17.5 billion investment just a day before that.
This offers a lesson in the limits of managed trade.
While tariffs can punish labour-intensive exporters of textiles, seafood, and jewellery, sectors where Indian firms are indeed hurting, they do little to stem the flow of digital capital.
A review of overseas data-centre investments from the US shows that India has become a premier destination for American tech investment, ahead of Japan and the UK, while leaving most Asian rivals far behind.
It isn’t just Big Tech.
The proliferation of Global Capability Centres (GCCs) tells a broader story of labour arbitrage moving up the value chain.
Perhaps the most ironic illustration arrived two months ago when McDonald’s, a brand Trump holds in high culinary regard, opened a 1,500-seat technology hub in Hyderabad.
With plans to expand further.
Talent Trumps Tariffs
The White House wants manufacturing jobs to return to the Rust Belt, and to some extent, tariffs encourage that reshoring.
But the modern economy is about data, services, and intellectual property.
To serve both the vast Indian domestic market and the global economy, US companies are building distinct ecosystems abroad that tariffs cannot easily dismantle, as is quite evident from all this activity.
Trump may tax rice and shirts, but he cannot tax the economic logic that drives American business to where growth and talent reside.
