As global trade dynamics shift under renewed U.S. pressure, India is showing signs of recalibrating its long-frosty relationship with China. Recent developments indicate a subtle thaw between the two Asian giants, driven in part by former U.S. President Donald Trump's renewed tariff threats and strategic outreach to Pakistan.
Trump’s potential return to power and his aggressive trade policies, particularly proposed tariffs on Chinese and Indian goods, are pushing New Delhi to rethink its regional strategy. Indian policymakers view these developments as a signal to reduce dependency on volatile Western trade relations by improving economic engagement with China.
One of the most significant signs of change came in the form of Foreign Minister S. Jaishankar’s recent visit to Beijing, the first high-level trip since the deadly border clash in 2020. While no formal agreements were signed, the visit was seen as a critical step in re-establishing dialogue. Additionally, the Indian government’s think tank, NITI Aayog, has recommended easing certain restrictions on Chinese investments—a move that could mark a dramatic shift in policy if adopted.
Economic cooperation between the two countries remains challenging. India continues to face a massive \$99 billion trade deficit with China. The situation was exacerbated earlier this year when Beijing imposed restrictions on rare-earth mineral exports, disrupting key Indian industries. Nevertheless, signs of de-escalation have emerged. Last year saw the restoration of patrolling agreements along parts of the disputed border. This year, commercial flights resumed and religious pilgrimages to Kailash Mansarovar restarted.
Despite these positive steps, underlying strategic frictions remain. India remains wary of China’s growing presence in the Indian Ocean, including the recent deployment of a Chinese research vessel in the Bay of Bengal. Political differences over Tibet and ongoing border disputes continue to complicate the relationship.
India is also hedging its position by strengthening alliances with other regional powers. New Delhi has deepened engagement with the Quad and the Russia-India-China (RIC) group while increasing military cooperation with the United States and Japan. This strategic balancing act underscores India’s cautious approach to any realignment with Beijing.
On the domestic front, the Reserve Bank of India is preparing new climate risk disclosure guidelines for banks, a move aimed at aligning India’s financial sector with global environmental standards. Meanwhile, Indian investors have shown increasing interest in silver, with mutual funds registering significant inflows in recent months.
India’s evolving relationship with China remains a story of cautious pragmatism. While Trump’s trade threats may have opened the door to diplomacy, real progress will depend on sustained political will, mutual trust, and concrete steps toward resolving long-standing disputes.