The U.S. administration’s aggressive trade policies, particularly the recent imposition of an additional 25% tariff on Indian goods, may be inadvertently fostering a strategic convergence between Asia’s two largest powers, India and China. This development risks undermining Washington’s broader geopolitical and economic objectives in the Indo-Pacific.
The US has now placed a combined 50% tariff on many Indian exports. This punitive measure, aimed at pressuring India over its energy trade with Russia, stands in contrast to Washington’s ongoing tariff war with China. In FY 2024-25, India’s bilateral trade with the US stood at approximately USD 131.8 billion, with Indian exports to the US making up a significant portion of that figure at USD 86.5 billion. The new tariffs are expected to put a massive dent in these exports, with some reports suggesting a potential 30% drop in Indian shipments to the US. This places India at a significant competitive disadvantage compared to other rivals in the US market.
In contrast, India’s trade with China, while also robust, is marked by a significant imbalance. In the same fiscal year, India’s trade deficit with China hit a record USD 99.2 billion, driven by India’s heavy reliance on Chinese imports for critical sectors. India’s exports to China stood at a mere USD 14.3 billion, highlighting a persistent structural disparity.
This complex economic landscape, coupled with US pressure, is providing a new incentive for India and China to find common ground.
A Pragmatic Shift for India
India, a nation that has historically sought strategic autonomy, is navigating this new pressure with a pragmatic and calibrated approach. While New Delhi has criticised the tariffs and the perceived double standards of Western nations, it has not engaged in tit-for-tat duties. Instead, the government is focusing on domestic economic measures to mitigate the impact. It is reportedly working on a ₹20,000 crore plan to support exporters and is actively promoting its “Make in India” initiative to bolster domestic production.
This period of US trade pressure coincides with a cautious warming of relations between India and China. This is highlighted by the upcoming visit of Prime Minister Narendra Modi to China for the SCO Summit in Tianjin, his first trip to the country since the Galwan clash in 2020. This high-level diplomatic engagement, along with a resumption of other dialogues, signals a mutual desire to manage tensions and prevent further escalation, even as border disputes remain unresolved.
How the Tariff War Could Backfire for the US
The US strategy of applying economic pressure on both India and China, while distinct in its motivations, risks an unintended consequence: it may inadvertently push the two powers closer together.
- Strategic Alignment: As Washington’s policies create economic uncertainties, India and China may find increased common interest in exploring avenues of cooperation on multilateral platforms. This could foster greater geopolitical alignment between the two nations.
- Reduced US Leverage: A deeper economic and strategic relationship between India and China could reduce the overall leverage the US holds over either country. This could diminish the effectiveness of unilateral US economic measures and complicate Washington’s broader Indo-Pacific strategy, which positions India as a key partner in countering China’s influence.
- Diversion of Trade: The US tariffs might accelerate the development of alternative trade routes and economic partnerships that bypass traditional US-centric frameworks. With India and China both actively exploring ways to strengthen regional economic cooperation, this could lead to a significant recalibration of power in the Indo-Pacific, with long-term implications for global trade.
In conclusion, while the US administration’s tariff war is designed to assert economic dominance, the complex geopolitical landscape of Asia suggests that this strategy may be creating an unexpected convergence between India and China, with significant consequences for global trade and international relations.
