Tensions between India and China recede as Prime Minister Modi favors BRICS coalition over President Trump
Improved India-China Economic Ties Amidst US Trade Tensions
Relations between India and China, which had been strained due to China's supply of weapons and intelligence to Pakistan in its military dispute with India, are showing signs of a thaw. This economic normalization comes after the resumption of key border trade routes, such as Lipulekh Pass, Nathu La, and Shipki La, which were closed following the Galwan Valley clash in 2020 [1].
The reopening of these routes has facilitated the exchange of high-value goods like pharmaceuticals, electronics, and machinery, benefiting border communities and streamlining supply chains crucial to both countries [1]. Institutional cooperation has also increased, with mechanisms like the Working Mechanism for Consultation and Coordination and an Expert Group on boundary delimitations [1].
The resumption of direct passenger flights is expected to further improve business connectivity [2]. Prime Minister Narendra Modi is also resuming direct flights with China as soon as next month, and he may meet Chinese President Xi Jinping at a summit in Tianjin starting on Aug. 31 [2].
However, US-India trade tensions have escalated in 2025, with the US imposing tariffs as high as 50% on Indian goods, including energy, textiles, and pharmaceuticals, largely due to India’s continued purchase of Russian oil [3][4]. This has created significant cost challenges for Indian exporters and led to some calls within India for boycotting US products [3].
The Adani Group, an Indian conglomerate, is exploring a tie-up with Chinese EV giant BYD Co. for manufacturing batteries in India [1]. This potential partnership underscores the ongoing efforts to strengthen India-China economic ties, despite the US-India trade tensions.
India's trade relations with the US have been further strained due to Indian purchases of Russian oil. This has led to diplomatic friction, with US President Donald Trump's remarks about India's economy and tariff barriers further straining relations [4].
Meanwhile, India is strengthening ties with other countries, such as Brazil and Russia. Modi has invited President Vladimir Putin to visit India, and he has also discussed trade with the Brazilian President Luiz Inacio Lula da Silva, agreeing to expand India's trade deal with Mercosur [4].
In the midst of these geopolitical shifts, China has eased curbs on urea shipments to India, the world's largest importer of the fertilizer [4]. This move further underscores the complex and evolving relationships among these global powers.
In summary, India-China economic relations have improved with renewed trade routes and institutional dialogue, signaling a cautious but clear normalization after the 2020 border clash. However, rising US-India trade tensions, marked by steep tariffs, represent a potential disruptive factor that could influence India's broader strategic and economic relationships, including those with China. The economic realignment is also influenced by broader shifts such as BRICS+ efforts to reduce reliance on the US dollar, offering alternative financial mechanisms to support resilient trade and investment flows [1][4].
[1] India-China border trade routes reopen [2] Modi to resume direct flights with China [3] US imposes 50% tariffs on Indian goods [4] India-US trade tensions escalate
- The improved relations between India and China are evident in increased business activities such as the exchange of high-value goods like pharmaceuticals, electronics, and machinery, as well as the reopening of trade routes like Lipulekh Pass, Nathu La, and Shipki La.
- The Adani Group's exploration for a partnership with Chinese EV giant BYD Co. underscores ongoing efforts to strengthen India-China economic ties, despite US-India trade tensions.
- US-India trade tensions have escalated in 2025, with the US imposing tariffs of up to 50% on Indian goods, including energy, textiles, and pharmaceuticals, largely due to India’s continued purchase of Russian oil.
- The resumption of direct passenger flights between India and China is expected to further boost business connectivity, while the US-India trade tensions have led to some calls within India for boycotting US products.
- India's trade relations with the US have been strained due to Indian purchases of Russian oil, leading to diplomatic friction and an increase in tariff barriers, further straining US-India relations.
- Meanwhile, India is strengthening ties with other countries like Brazil and Russia, agreeing to expand trade with Mercosur and inviting President Vladimir Putin for a visit.
- China has eased curbs on urea shipments to India, signaling a shift in their complex and evolving relationships, amidst broader geopolitical shifts such as the BRICS+ efforts to reduce reliance on the US dollar.
