US President Donald Trump’s aggressive tariff war has brought about an unexpected geopolitical outcome. India and China, ranked as the fifth and second largest economies in the world, are beginning to strengthen ties with an emphasis on trade cooperation. This development carries weight, as the two neighbouring nations have experienced strained relations over the past few years.

Interestingly, reports suggest that Beijing started reaching out to New Delhi even before Trump introduced his so-called ‘Liberation Day’ tariffs in April. According to a Bloomberg report, China initiated discreet diplomatic communication with India in March, just as Washington escalated its trade conflict with Beijing. This move signalled China’s interest in forging new economic partnerships and reducing dependency on the US.

Xi Jinping’s Quiet Outreach to India

In March, Chinese President Xi Jinping sent a personal letter to Indian President Droupadi Murmu. The letter explored possibilities of strengthening bilateral ties and expressed concerns over potential US agreements that might hurt Chinese interests. As reported by Bloomberg, Xi even designated a regional official to lead Beijing’s diplomatic initiatives.

This communication was later conveyed to Prime Minister Narendra Modi, signalling the seriousness of China’s intent. Shortly after, Beijing released a statement quoting Xi, in which he praised India-China relations. Senior Chinese leaders, including Vice President Han Zheng, also adopted the same positive tone, pointing to a new phase of cooperation between the two nations.

Image source | Times of India

New Signs of a Thaw in Bilateral Relations

India’s National Security Adviser Ajit Doval has been at the forefront of this diplomatic engagement. Known for his direct channel with China’s top leadership, Doval visited Beijing in December 2024 and again in June 2025 as India’s special representative for border negotiations.

According to officials, New Delhi intensified its efforts to rebuild ties with China around June, a time when trade talks with the US had become increasingly difficult. Frustration had also grown in India after Trump’s remarks about mediating between India and Pakistan following their May clash.

In July, External Affairs Minister S. Jaishankar travelled to Beijing for his first meeting in five years with Chinese counterpart Wang Yi. During the talks, Jaishankar raised concerns over “restrictive trade measures and roadblocks”, indirectly pointing to China’s export limits on rare earth materials. Officials later confirmed that China assured India about supplies of both fertiliser and rare earths.

Since then, several positive steps have been taken. Plans are underway to restart direct flight services as early as next month. China has also eased restrictions on urea exports, while India has restored tourist visa services for Chinese citizens after a long suspension.

Business interests are also coming into play. The Adani Group, led by Gautam Adani, is reportedly exploring a partnership with Chinese electric vehicle giant BYD Co. for battery production in India. Reliance Industries Ltd. and JSW Group are also said to be quietly building business arrangements with Chinese firms, according to Bloomberg News.

By August, the progress was clear. Both nations, still burdened by Trump’s tariffs, were actively moving beyond the 2020 border conflict. Their renewed commitment included attempts to address long-standing territorial disputes dating back to the colonial era. Prime Minister Modi’s upcoming trip to China — his first in seven years — is further evidence of the diplomatic thaw.

Source | Times of India - Highest rates for 'BICS' nations

How Washington’s Actions Are Changing the Equation

For years, the United States carefully nurtured its relationship with India as part of a strategy to balance China’s rise. But this approach suffered a major setback when Trump imposed 50% tariffs on Indian exports, citing India’s purchases of Russian oil. The decision caused deep concerns in New Delhi.

Commenting on the sudden shift, Ashley Tellis, senior fellow at the Carnegie Endowment for International Peace and a former US diplomat in New Delhi, remarked ironically: “Trump is indeed the great peacemaker — he deserves all the credit for stimulating the incipient rapprochement between Delhi and Beijing.” He added: “He has singlehandedly pulled this off by treating India as an enemy.” 

A meeting between Prime Minister Modi and President Xi is already scheduled for September 1, during the Shanghai Cooperation Organisation (SCO) summit in Tianjin, close to Beijing.

The timing is crucial. China’s economy is slowing down, struggling with deflation and oversupply in industries such as electric vehicles and solar panels. India, with its population of 1.4 billion — mostly young — represents an attractive market for Chinese products at a time when access to the US and European markets is narrowing.

Indian policymakers also realise that Chinese investment in manufacturing could help achieve Modi’s goal of increasing the sector’s share to 25% of GDP. Bloomberg Economics has estimated that if high US tariffs continue, nearly 60% of India’s exports to the American market could collapse, shrinking India’s GDP by almost 1% in the medium term.

However, regulatory issues remain. For example, most Chinese employees at Foxconn’s iPhone plants in southern India were asked to leave. Meanwhile, Beijing has pushed its regulators and regional governments to curb technology transfers and equipment exports to India.

Antara Ghosal Singh, a fellow at the Observer Research Foundation, noted: “The economic possibilities are huge if the two countries can settle differences and build trust.” She added: “Leaders of both countries have often spoken about economic possibilities but haven't been able to get over trust issues.” Singh concluded, “Trump is a good incentive for both countries to reconsider their options.”