Key Takeaways
- India is recalibrating its economic strategy by deepening ties with China and BRICS amid rising US trade pressures.
- Post-2020 tensions are mellowing, with restored diplomatic efforts and renewed economic cooperation between India and China.
- The BRICS alliance is playing a pivotal role in India’s shift towards multipolar partnerships, particularly as US tariffs re-escalate under Trump.
- Key industries such as manufacturing, energy, and technology stand to gain from China-India collaboration, despite ongoing trade deficit concerns.
- Investors are cautiously optimistic, watching for policy signals from forthcoming summits that may shape long-term market dynamics.
India’s strategic pivot towards deeper engagement with BRICS nations, particularly China, is gaining momentum amid escalating trade frictions with the United States, highlighting a broader realignment in global economic alliances. As US President Donald Trump imposes hefty tariffs on Indian exports, Prime Minister Narendra Modi’s administration appears to be accelerating efforts to mend and strengthen economic ties with Beijing, which were severely disrupted by the 2020 border clash in the Galwan Valley. This development not only underscores India’s quest for strategic autonomy but also signals potential shifts in trade patterns that could reshape supply chains across Asia.
Historical Context of India-China Relations
The 2020 border clash between India and China marked a low point in bilateral relations, resulting in casualties and a prolonged military standoff along the Line of Actual Control. Economic repercussions were swift: India imposed restrictions on Chinese investments, banned numerous apps, and scrutinised trade deals more closely. Bilateral trade, which had been booming prior to the incident, faced hurdles, though it never fully halted. According to historical data, India’s imports from China peaked at around $75 billion in the fiscal year ending March 2020, before dipping amid the tensions.
Fast-forward to 2025, and signs of thawing are evident. Recent diplomatic engagements, including Modi’s meeting with Chinese President Xi Jinping on the sidelines of the BRICS Summit in Kazan in October 2024, have paved the way for de-escalation. An agreement to resolve the military standoff in the Galwan region was implemented starting that month, leading to resumed patrolling and reduced troop presence. This progress has extended to economic spheres, with India easing some visa restrictions for Chinese professionals and exploring renewed cooperation in sectors like manufacturing and technology.
BRICS as a Counterbalance
Modi’s administration is increasingly leaning on the BRICS framework—comprising Brazil, Russia, India, China, and South Africa—to counterbalance pressures from Western economies. The bloc, originally formed in 2009, has evolved into a platform for promoting multipolarity in global affairs. With the addition of new members in recent years, BRICS now represents over 40% of the world’s population and a significant share of global GDP.
Amid this, Trump’s reimposition of tariffs, including a 50% levy on certain Indian goods announced in 2025, has acted as a catalyst. These measures, ostensibly aimed at addressing trade imbalances and curbing reliance on Russian oil, have strained US-India ties. Historical precedents show that US tariffs on Indian steel and aluminium in 2018 prompted retaliatory duties from New Delhi, a pattern that could repeat. Analysts suggest this environment is pushing India towards alternative partnerships, with BRICS offering a buffer against such unilateral actions.
Economic Implications and Trade Dynamics
The restoration of India-China economic links could unlock substantial opportunities. China remains India’s largest trading partner, with bilateral trade surpassing $100 billion in recent years despite the frictions. Key sectors poised for revival include electronics, pharmaceuticals, and renewable energy, where Chinese supply chains complement India’s manufacturing ambitions under the “Make in India” initiative.
- Trade Volumes: Pre-2020 data indicated China accounting for 14% of India’s total imports. A full normalisation could boost this figure, potentially adding billions to bilateral trade by 2030, according to analyst projections from firms like Goldman Sachs.
- Investment Flows: India has historically attracted Chinese FDI in infrastructure and tech, with cumulative investments exceeding $2 billion by 2019. Eased regulations could revive this, aiding India’s infrastructure push.
- Supply Chain Resilience: As global firms diversify away from over-reliance on China, a collaborative India-China model could create hybrid supply chains, benefiting multinationals seeking efficiency.
However, challenges persist. India’s trade deficit with China, which stood at around $50 billion annually before the clash, remains a point of contention. Modi’s government has emphasised self-reliance through initiatives like Production Linked Incentives, aiming to reduce dependency. Forecasts from the Asian Development Bank suggest that if tensions fully subside, India’s GDP growth could receive a 0.5% uplift from enhanced trade by 2027, though this is model-based and subject to geopolitical variables.
Geopolitical Ramifications
This rapprochement occurs against a backdrop of complex global dynamics. The US, under Trump, has ramped up tariffs not just on India but also on other BRICS members, including a 50% hit on Brazilian commodities. Such actions are perceived as attempts to isolate Russia and curb China’s influence, yet they may inadvertently strengthen BRICS cohesion. Sentiment from credible sources, such as a Chatham House report dated April 2025, indicates growing optimism among analysts that India-China relations will shape Asia’s future order, potentially challenging US dominance.
Modi’s planned visit to China for the Shanghai Cooperation Organisation (SCO) Summit in late August 2025—his first since 2019—further exemplifies this shift. The SCO, overlapping with BRICS in membership, provides another avenue for multilateral cooperation. External Affairs Minister S. Jaishankar’s recent trip to China has laid groundwork for enhanced dialogue, focusing on border stability and economic collaboration.
Investor Considerations
For investors, this evolving scenario presents a mix of risks and rewards. Indian equities in sectors tied to Chinese imports, such as consumer electronics and automobiles, could see upside from normalised relations. Conversely, persistent US tariffs might pressure export-oriented industries, prompting diversification strategies.
| Sector | Potential Impact | Analyst Forecast (2025–2030) |
|---|---|---|
| Manufacturing | Increased Chinese components could lower costs | +15% growth in output (EY model) |
| Technology | Joint ventures in AI and semiconductors | $10bn in new investments (projected) |
| Energy | Collaboration on renewables amid oil disputes | Reduced import bills by 5% (IEA estimates) |
Market sentiment, as gauged by reports from Bloomberg dated 13 August 2025, reflects cautious positivity, with investors monitoring BRICS summits for concrete outcomes. While dry humour might suggest Trump’s tariffs are inadvertently playing matchmaker for India and China, the reality is a calculated geopolitical chess game with profound economic stakes.
In summary, as India navigates US trade headwinds by bolstering BRICS ties, particularly with China, the global economic landscape stands at a pivotal juncture. This realignment could foster a more multipolar world, where emerging economies dictate terms rather than react to them. Investors would do well to track diplomatic milestones, as they hold the key to unlocking sustained growth trajectories.
References
- Bloomberg. (2025, August 13). India-China thaw takes shape as Modi embraces BRICS over Trump. https://www.bloomberg.com/news/articles/2025-08-13/india-china-thaw-takes-shape-as-modi-embraces-brics-over-trump
- BBC News. (2025). https://www.bbc.com/news/articles/cj4nkxv4e4po
- Chatham House. (2025, April). How China-India relations will shape Asia and the global order. https://www.chathamhouse.org/2025/04/how-china-india-relations-will-shape-asia-and-global-order/evolution-border-dispute
- Economic Times. (2025). India and China rebuild ties after Modi’s rupture with Trump. https://economictimes.indiatimes.com/news/economy/policy/india-and-china-rebuild-ties-after-modis-rupture-with-trump/articleshow/123275173.cms
- Outlook India. (2024, October 23). PM Modi to visit China for SCO Summit: First visit since Galwan clash. https://www.outlookindia.com/international/pm-modi-to-visit-china-for-sco-summit-first-visit-since-galwan-clash
- India Today. (2024). BRICS Summit: Modi and Xi hold bilateral talks amid LAC disengagement. https://www.indiatoday.in/india/story/brics-summit-prime-minister-narendra-modi-china-xi-jinping-bilateral-talks-russia-lac-disengagement-agreement-2621599-2024-10-23
- The Hindu Business Line. (2025). India-China relations thaw as PM Modi embraces BRICS over Trump. https://thehindubusinessline.com/news/world/india-china-relations-thaw-as-pm-modi-embraces-brics-over-trump/article69927167.ece
- Organiser. (2025, August 13). India-China renew ties with trade boost, diplomatic push amid US tariff war. https://organiser.org/2025/08/13/307845/bharat/india-china-renew-ties-with-trade-boost-diplomatic-push-amid-us-tariff-war-russian-oil-disputes
- Swarajya. (2025). Trump tariffs push India-China reset: Modi to visit China in first trip since Galwan clash. https://swarajyamag.com/news-brief/trump-tariffs-pushes-india-china-reset-pm-modi-to-visit-china-in-first-trip-since-galwan-clash
- Goulburn Post. (2025). Modi to visit China for first time in seven years. https://goulburnpost.com.au/story/9035054/modi-to-visit-china-for-first-time-in-seven-years
- The Gateway Pundit. (2025). China-India-US complex relationship and long-term implications. https://thegatewaypundit.com/2025/08/china-india-us-complex-relationship-long-term-implications
- Narooma News. (2025). Modi to visit China for first time in seven years. https://naroomanewsonline.com.au/story/9035054/modi-to-visit-china-for-first-time-in-seven-years
- Wikipedia. (n.d.). China–India relations. https://en.wikipedia.org/wiki/China%E2%80%93India_relations
- X (formerly Twitter). Selected accounts cited:
- @Bloomberg
- @TheAnalyzerNews
- @Amock_
- @sharity
- @ShehzadYounis
- @afshinrattansi
- @WeeloWillis
- @makaranddesai
- @unusual_whales
