Reeling from Trump’s tariffs, India and China seek a business reboot

In a significant shift, India and China are seeking to reboot their business relationship amid escalating US tariffs, with Prime Minister Narendra Modi’s visit to China highlighting efforts to counter economic pressures and explore new cooperation avenues. The US imposition of 50% tariffs on Indian goods, effective August 27, 2025, has intensified economic strains, prompting India to reconsider its strategic partnerships. This move by the Trump administration, aimed at punishing India for continued Russian oil purchases, has disrupted trade and threatened millions of jobs in export-dependent sectors. In response, Prime Minister Modi has emphasized self-reliance, urging domestic production and consumption through initiatives like ‘Made in India’ campaigns. His government is also proposing tax reforms, including a simplified GST system, to stimulate the economy and mitigate the tariff impact. Concurrently, China, facing its own economic challenges under high US tariffs, sees an opportunity to strengthen ties with India. President Xi Jinping’s administration is open to resetting the relationship, which has been marred by border disputes and mistrust, to leverage mutual economic strengths. Historically, India-China relations have been complex, with the 2020 Galwan Valley clash leading to economic decoupling, including bans on Chinese apps and reduced investments. However, recent developments, such as the resumption of direct flights and discussions on trade, indicate a thaw. Modi’s current visit to China for the Shanghai Cooperation Organisation (SCO) summit serves as a platform for dialogue. Experts note that both nations, as members of BRICS and SCO, are exploring ways to reduce dependence on the US and reshape global trade dynamics. Potential areas of cooperation include manufacturing partnerships, where India could benefit from China’s supply chain expertise while avoiding direct competition. Visa relaxations and increased market access are also on the table, offering China a chance to tap into India’s large consumer base. This rapprochement signals a strategic pivot for India, which had previously aligned more closely with the US to counter China’s influence. The tariff dispute has forced a reassessment, with India leveraging regional alliances to maintain economic stability. The outcome of this reset could have far-reaching implications for global trade, potentially altering supply chains and geopolitical alliances. While significant challenges remain, the renewed engagement between India and China underscores the shifting dynamics in international relations.