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India’s Prime Minister Narendra Modi is set to arrive in China this weekend, with the impact of US tariffs imposed by the Trump administration looming large.
As of Wednesday, tariffs on Indian goods destined for the US, including diamonds and shrimp, have risen to 50%. The US president has cited Delhi’s continued purchases of Russian oil as justification for the levies.
Analysts suggest these tariffs pose a significant threat to India’s robust export sector and its ambitious economic growth targets.
Similarly, China’s Xi Jinping is navigating efforts to revitalize a slowing Chinese economy amidst concerns that elevated US tariffs could undermine his objectives.
Against this backdrop, the leaders of the world’s two most populous nations may seek to recalibrate their relationship, which has historically been characterized by distrust, largely stemming from unresolved border disputes.
“Simply put, the dynamics of this relationship hold global significance,” noted Chietigj Bajpaee and Yu Jie of Chatham House in a recent analysis.
“India was never destined to be the bulwark against China that the West (and the United States, in particular) envisioned… Modi’s visit to China represents a potential turning point.”
India and China stand as economic powerhouses, ranking as the world’s fifth and second largest economies, respectively.
With India’s growth projected to remain above 6%, boasting a $4 trillion economy and a $5 trillion stock market, the IMF forecasts it will ascend to the third position by 2028.
“While global attention has traditionally focused on the US-China relationship, it is imperative to increasingly examine how the second and third largest economies, China and India, can collaborate,” suggests Qian Liu, founder and chief executive of Wusawa Advisory, based in Beijing.
However, the relationship faces considerable challenges.
An enduring territorial dispute remains unresolved between the two countries, reflecting a broader and more profound rivalry.
Violent clashes erupted in Ladakh’s Galwan Valley in June 2020, marking the most intense period of hostility between the two nations in over four decades.
The repercussions were largely economic, with the suspension of direct flights, delays in visa processing and Chinese investments, resulting in slower infrastructure projects. India also banned more than 200 Chinese apps, including TikTok.
“Dialogue will be essential to effectively manage the expectations of other nations who view India-China relations as a critical element of Asia’s broader stability,” according to Antoine Levesques, senior fellow for South and Central Asian defence, strategy and diplomacy at IISS.
Additional points of contention include Tibet, the Dalai Lama, and water disputes arising from China’s plans to construct the world’s largest hydroelectric power project on a river shared by both countries, as well as heightened tensions with Pakistan following the Pahalgam attack.
Furthermore, India’s relations with its South Asian neighbors are strained, while China maintains key trading partnerships with Pakistan, Bangladesh, Sri Lanka, and Afghanistan.
“While the establishment of a BYD factory in India may be unlikely, some smaller gains are possible,” notes Priyanka Kishore, founder and principal economist at research company Asia Decoded.
The resumption of direct flights has already been announced, and further relaxations on visas and additional economic agreements may follow.
However, the relationship between Delhi and Beijing remains “an uncomfortable alliance to be sure,” Ms. Kishore observes.
“It’s worth remembering that at one time, the US and India were aligning to counterbalance China,” she adds.
But India finds itself increasingly at odds with the US position: “So it’s a strategic move – and reinforces the multipolar narrative that both India and China share.”
Modi’s trip to China is for the Shanghai Cooperation Organisation (SCO) summit, a regional body that aims to present an alternative global perspective to that of the West. Members include China, India, Iran, Pakistan, and Russia.
In the past, India has minimized the significance of the SCO, and critics argue that it has failed to produce significant outcomes over the years.
The June SCO defense ministers’ meeting concluded without a joint statement, as India objected to the omission of any reference to the deadly April 22 attack on Hindu tourists in Indian-administered Kashmir, which triggered the worst fighting between India and Pakistan in decades.
However, experts suggest that the deterioration of Delhi’s relations with Washington has prompted India to reassess the value of the SCO.
Meanwhile, China will likely value the optics of Global South solidarity amidst the trade tensions instigated by the Trump administration.
The BRICS grouping, which also includes China and India, has drawn criticism from Trump, who has threatened to impose additional tariffs on its members on top of already negotiated rates.
Modi last met with Xi and Russia’s Vladimir Putin at the BRICS summit in Russia in October 2024. Russian embassy officials recently stated that Moscow hopes to hold trilateral talks with China and India in the near future.
“By capitalizing on their respective strengths—China’s manufacturing prowess, India’s service sector capabilities, and Russia’s abundant natural resources—they can reduce their dependence on the United States, diversify their export markets, and ultimately reshape global trade flows,” Bajpaee and Yu argued in their editorial.
Delhi is also pursuing other regional alliances, with Modi making a stop in Japan en route to China.
“ASEAN and Japan would welcome closer cooperation between China and India. It can greatly benefit supply chains and promote the concept of Make in Asia for Asia,” Ms. Kishore suggests.
India remains reliant on China for its manufacturing sector, sourcing raw materials and components from the country. It will likely seek lower import duties on these goods.
According to experts, India’s restrictive industrial policies have hindered its ability to fully capitalize on the supply chain shift from China to Southeast Asian countries.
A strong case can be made for partnership, Ms. Kishore argues, with India positioning itself to manufacture more electronics.
She points out that Apple manufactures AirPods and wearables in Vietnam and iPhones in India, eliminating any potential overlap.
“Faster visa approvals would be an easy win for China. It seeks market access in India, either directly or through investments. It faces a shrinking US market, ASEAN markets are already saturated, and many Chinese apps like Shein and TikTok are banned in India,” Ms. Kishore states.
“Beijing would welcome the opportunity to sell to 1.45 billion people.”
Given the complexity of the relationship, a single meeting is unlikely to bring about significant change. Substantial progress is still needed to improve China-India ties.
However, Modi’s visit to China could help ease some animosity and send a clear signal to Washington that India has alternative options.
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