For now, tech gets room to breathe

Even as US commerce secretary Howard Lutnick added the rider on Sunday that electronics will face new tariffs within a month, American tech majors have won a reprieve from Trump's tariff war through an exemption for electronics imports. Washington is yet to spell out its reasons and has signalled they will be subject to future sectoral tariffs while Beijing is cautiously optimistic about the carveout. But there are some robust arguments for dialling down trade hostilities. The US needs hardware to retain its competitive advantage in tech and can't yet match China's manufacturing scale. The pushback over tariffs from stock and bond investors last week may have made the Republican Party wary in the run-up to the midterm elections. Finally, Silicon Valley may simply have used its clout in Washington to get its way.

The last reason for Trump's latest volte-face on tariffs suggests there may be a way for the US to pursue its ambitions without pushing world trade into a tailspin. Reindustrialising the US cannot be accomplished without first diversifying global supply chains beyond China, across Asia. Fresh investments in domestic manufacturing can still rely on labour cost arbitrage while maintaining tighter control over local value addition. The result would be a speeding up of supply chain resilience without undue productivity compromises. China, too, can be persuaded to participate in this process and help deflect targeted US actions over global trade imbalances.

This presents a rare opportunity for emerging economies like India, which stand to benefit from a more nuanced approach by the world's two largest players. US Inc will need to put its 'China Plus One' strategy on steroids if it wants to avert a consumer backlash over economic efficiency. The US and China must now collaborate to seed industrial ecosystems in more countries.