Just as I was recording this video a news report quoted a statement from the US Embassy in India, quoting Secretary of State Marco Rubio, that emphasises the "enduring friendship" between the US and India as a "defining relationship of the 21st century," highlighting progress in innovation, entrepreneurship, defense, and bilateral ties. The timing—posted on X just minutes before Prime Minister Modi's meeting with Russian President Putin at the SCO summit in Tianjin—adds a layer of geopolitical signalling. It would be premature to interpret this as an olive branch. Barring platitudes, Rubio does not mention any initiative for resolving specific disputes like lifting tariffs. It's a low-cost way for the US to project positivity and maintain influence over India without conceding ground. It underscores the transactional nature of US foreign policy under Trump: affirming friendships when convenient, but backed by economic sticks. So, I shall return to my original analysis.
Over the past few years, global politics has transformed beyond imagination. Multiple centres of power have replaced the unipolar system. Consequently, global power dynamic is in a flux. As power centres competing, clashing and cooperating with each other, India stands at crucial crossroads.
India has traditionally followed a policy of “multi-alignment,” a modern form of nonalignment that allows it to engage with multiple powers at the same time. Under Dr. Manmohan Singh, relations with the United States became the centrepiece of this approach, with cooperation in trade, defense, and regional security. Together with Japan and Australia, the two countries also built the Quad to counter China’s growing presence in the Indo-Pacific. However, as of August 30, the situation looks very different. The U.S. has imposed heavy tariffs on Indian exports, creating friction in what was once considered a strong and reliable partnership. In response, India has begun to soften its stance toward China, despite decades of mistrust due to border clashes and a large trade gap.
Part 1: The Collapse of U.S.–India Economic Ties
The U.S.–India relationship has been one of the defining stories of world politics since the late 1990s. Post-Cold War, the two countries began to work together on technology, energy, and defense. By 2024, the numbers looked strong and the relationship stable. Total goods and services trade was $212.3 billion. India was the 10th largest goods trading partner for the U.S.
But deep differences remained. The U.S. complained that India kept tariffs high on many American products, making it hard for U.S. firms to compete. Washington was also unhappy that India kept buying large amounts of discounted Russian oil despite Western sanctions following the Ukraine war. On July 31, the U.S. announced that starting August 7, it would impose a 25% “reciprocal” tariff on a wide range of Indian goods. They argued that this was necessary to push India toward “fair trade” and to stop it from undermining sanctions on Russia.
Barely three weeks later, on August 27, the U.S. raised the tariffs to 50% on most Indian exports, including textiles, gems, seafood, and machinery.
Impact on India’s Exports
According to the Federation of Indian Export Organisations, about 55% of India’s exports to the U.S., worth nearly $48 billion, would now face a 30–35% price disadvantage compared to competitors from countries like Vietnam or China. Textiles, jewellery, and leather goods were hardest hit. Exporters could lose up to $4–5 billion in sales within a year. Some predicted job losses in labor-intensive industries.
Domestic Fallout in the U.S.
Economists argued that the tariffs would raise prices for American consumers and hurt U.S. companies that import intermediate goods from India. Business groups pointed out that Washington had encouraged firms to move supply chains out of China—and now it was punishing India, the very alternative partner it had promoted. On August 29, 2025, a federal appeals court in the U.S. ruled that many of these tariffs were illegal. However, the court allowed the tariffs to remain in place until mid-October, pending a likely appeal to the Supreme Court. This legal uncertainty adds another layer of confusion.
Economic Consequences for India
India’s economy is showing resilience. In the April–June 2025 quarter, GDP grew by 7.8% year-on-year, the fastest in five quarters. But, if tariffs remain, growth could fall by upto 1.0 percent in the coming year. The rupee has already touched record lows against the dollar, while stock markets have seen sharp volatility. Exporters in Gujarat, Tamil Nadu, and Maharashtra, which have strong ties to U.S. markets, have raised concerns.
Strategic Consequences
The damage is not only economic. Strategic cooperation may suffer. India has been central to U.S. plans in the Indo-Pacific, especially through the Quad, to counterbalance China. A betrayed India may reduce its willingness to align too closely with U.S. strategic goals. According to a Brookings Institution report, this is the “toughest moment in U.S.–India relations since the 1998 nuclear tests.”
Part 2: The Thaw in India–China Relations
India–China ties have been strained for decades, with the 1962 war and several border clashes shaping mutual suspicion. The 2020 clash in the Galwan Valley, which killed soldiers on both sides, brought relations to a historic low. On October 2024, the two countries signed a Border Patrol Agreement. This allowed troops to disengage from some flashpoints along the Line of Actual Control. It was not a full solution, but it created space for dialogue. Since then, both countries have taken steps to restore normal ties.
Key Developments in 2025
In April, the Kailash Mansarovar Yatra, a pilgrimage route through Tibet, resumed after five years. By July, India reinstated tourist visas for Chinese citizens. On August 18–19, Chinese Foreign Minister Wang Yi visited New Delhi. He and India’s External Affairs Minister agreed to resume direct passenger flights that had been suspended since 2020, reopen border trade posts to benefit local communities, and explore new investment opportunities.
India’s Prime Minister visited Japan on August 29–30, 2025, to attend the 15th Annual Summit. He held talks with Japanese Prime Minister Shigeru Ishiba to deepen cooperation in trade, security, and technology. Japan agreed to have half a million skilled Indian workers over the next five years and invest more than ¥10 trillion or $68 billion in India. They discussed greater security cooperation, collaboration on semiconductors, artificial intelligence, and clean energy, as well as major joint projects like the bullet train and Chandrayaan-5. The year 2025 was also declared the India-Japan Year of Science, Technology, and Innovation, giving special focus to cultural and academic exchanges.
13 agreements were signed covering economic, security, and human resource areas. The outcomes promise new jobs, more investment, and stronger technology partnerships, especially in AI and clean energy.
On August 31–September 1, the Prime Minister attended the Shanghai Cooperation Organisation (SCO) Summit in Tianjin, China. On the sidelines, the PM met Russian President Vladimir Putin to expand cooperation in trade, space, fertilisers, security, and culture. They also discussed the Ukraine conflict. His meeting with Chinese President Xi Jinping was seen as a breakthrough. Xi called India and China “partners, not rivals”; you can interpret it in any manner you want, but it is definitely not a reset. PM spoke of creating “an atmosphere of peace,” recalling principles like Panchsheel, harking back to the Nehru era.
Economic Dimensions
Trade between India and China is large but unbalanced. In 2023, it reached $136.2 billion, with India importing far more than it exported. In 2024–25, the figure fell slightly to $127.7 billion, but India’s deficit remained huge at $99.2 billion. India depends on China for many critical inputs, including electronics, machinery, and chemicals. Relaxing restrictions on Chinese firms could bring investment and jobs.
Both countries have strong incentives to cooperate. India needs access to affordable technology and markets. China, facing U.S. pressure, wants to diversify its trade and improve ties with neighbours.
Part 3: Why India Is Pivoting Toward China
The economic pressure created by U.S. tariffs has driven India’s growing outreach to China. The 50% duties imposed by Washington threaten billions of dollars in Indian exports and put countless jobs at risk. To cushion this impact, New Delhi needs new markets and alternative sources of investment. China, as the world’s second-largest economy and a hub of global supply chains, offers both opportunities.
Geopolitical realities are also influencing India’s pivot. The unpredictability of U.S. policy has made India more cautious, particularly as Washington’s perceived friendliness toward Pakistan continues to create unease in New Delhi. For decades, New Delhi has resisted becoming overly dependent on any single partner. The sudden U.S. tariffs highlight the risks of such reliance. By strengthening ties with China, India signals its refusal to become a pawn in the larger U.S.–China rivalry.
Also, there are immediate and practical gains from the thaw. The restoration of flights, the revival of tourism, and the reopening of border trade posts bring direct benefits to communities and businesses. Potential Chinese investments in electronics, renewable energy, and infrastructure could generate much-needed jobs at a time when American trade barriers threaten employment in export-driven industries. Together, these factors explain why India sees engagement with China as both a necessity and an opportunity.
Part 4: Long-Term Effects for India
Closer ties with China could help India stabilise growth in the short term. Investments and inputs from China may boost manufacturing. More tourists and trade routes can support local economies. But a deeper economic relationship may increase India’s vulnerability to Chinese pressure. If relations sour again, India could find itself exposed in critical sectors like electronics or pharmaceuticals. India’s role in the Quad may weaken if it leans too close to Beijing. Allies like Japan and Australia may question New Delhi’s reliability.
So, India must manage perceptions. If it seems too close to China, it could lose influence with Western powers. The art will lie in maintaining balance.
Part 5: Is a Lasting Partnership with China Possible?
Despite the current thaw, a full-fledged alliance between India and China is unlikely. Mistrust runs deep. The unresolved border dispute, China’s ties with Pakistan, and competition in the Indian Ocean remain major obstacles. So, pragmatic cooperation is a more realistic option. The two countries may continue to expand trade, tourism, and investment while keeping security issues managed but unresolved.
Conclusion
India’s shift in 2025 shows the challenges of navigating a world with multiple power centres. The breakdown of U.S.–India ties has pushed New Delhi to look again at Beijing. The thaw with China brings opportunities for trade, tourism, and investment. But it also carries risks of over-dependence and strategic vulnerability.
In the coming years, if India can keep its autonomy while engaging with both the U.S. and China, it may emerge stronger as a leader in the multipolar world. If not, it risks being pulled too far into the orbit of one rival power. This may harm India’s efforts to protect its economic growth, security, and global influence in a time of turbulence.
SCO, Shanghai Cooperation Org, Modi. Wang Yi, Xi Jinping, Putin, Trump, Russia, China, India, Pakistan, Japan, Quad, BRICS, Terrorism
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