India and China Seek Economic Reset Amidst Trump-Era Tariffs

India's Prime Minister Narendra Modi lands in China this weekend with the sting of Donald Trump's US tariffs still top of mind. Since Wednesday, tariffs on Indian goods bound for the US, like diamonds and shrimp, now stand at 50% – which the US president says is punishment for Delhi's continued purchase of Russian oil.

Experts say the levies threaten to leave lasting bruises on India's vibrant export sector and its ambitious growth targets. China's Xi Jinping too is trying to revive a sluggish Chinese economy at a time when sky-high US tariffs threaten to derail his plans.

Against this backdrop, the leaders of the world’s two most populous countries may both be looking for a reset in their relationship, which has previously been marked by mistrust, a large part of it driven by border disputes.

What would a stronger relationship mean?

India and China are economic powerhouses – the world's fifth and second largest respectively. But with India's growth expected to remain above 6%, a $4 trillion economy, and $5 trillion stock market, it is on the way to moving up to third place by 2028, according to the IMF.

While the world has traditionally focused on the US-China relationship, it's time to shift some focus onto how China and India can work together, says Qian Liu, founder and CEO of Wusawa Advisory, based in Beijing. The relationship, however, is deeply challenging due to unresolved territorial disputes and historical conflicts.

India's Position Has Changed

Modi is travelling to China for the Shanghai Cooperation Organisation (SCO), aiming to project a multipolar narrative that both India and China believe in. Experts say the downturn in Delhi's relations with Washington has prompted India to rediscover the utility of the SCO amidst Trump's tariff chaos.

How Can China and India Cooperate Economically?

India continues to rely on China for its manufacturing capabilities, sourcing raw materials and components. There’s a clear case for partnership, with potential collaboration in electronics manufacturing. However, the complexity of the relationship suggests that one meeting is unlikely to resolve longstanding issues completely.

Nevertheless, Modi's visit to China could send a strong message to Washington that India has options beyond its alliance with the West.