India’s trade relations with China have become a subject of global attention as pressure from the United States intensifies. The unfolding events show how economics, geopolitics, and strategic interests are closely linked. The coming years will decide whether India can maintain its commercial ties with China despite external challenges.
In August 2025, the United States sharply raised tariffs on Indian goods. A 25 percent “reciprocal” tariff was first imposed, followed soon by another 25 percent increase. Together, this resulted in an effective duty of 50 percent. The main reason behind this move was India’s continued purchase of discounted oil from Russia, which Washington saw as undermining its sanctions.
These tariff hikes had immediate consequences for India’s economy. The country’s Chief Economic Adviser warned that the duties could reduce India’s GDP growth by 0.5 to 0.6 percentage points in the financial year 2025–26. Even so, India is still expected to grow at a healthy pace of around 6.3 to 6.8 percent. The economy had already shown strength by expanding 7.8 percent in the first quarter of the year.
To counter the impact of the tariffs, New Delhi introduced relief through the Goods and Services Tax system. Tax rates on essentials, consumer durables, and insurance were lowered. This move was designed to boost household consumption by an estimated $20 billion each year. Analysts also project that the tax relief could help corporate earnings rise by as much as 14 percent in 2026.
While these measures helped soften the blow, the tariffs created strain in the broader India–US relationship. Diplomatic warmth cooled as India began reaching out more actively to other major powers. Symbolic summits and public appearances of Prime Minister Narendra Modi alongside Chinese President Xi Jinping and Russian President Vladimir Putin reflected this shift. Many observers called this one of the most serious crises in India–US relations in decades. China’s ambassador to India openly encouraged both countries to jointly resist trade wars and protectionist barriers imposed by Washington.
India’s trade relationship with China has been marked by both growth and imbalance. In the fiscal year 2024–25, India’s trade deficit with China widened to a record $99.2 billion. Much of this was due to the rising imports of electronics, machinery, and consumer goods from China.
Overall, bilateral trade between the two countries has steadily expanded. In 2023, the total trade value stood at around $136.2 billion. But while imports from China have surged, Indian exports to China have not kept up. From 2005 to 2024, Indian exports to China grew only from $10 billion to $14.9 billion, while imports from China increased more than tenfold. This shows India’s growing dependence on Chinese supply chains, particularly in technology and manufacturing.
At the same time, there have been signs of normalization in relations. Border tensions that had strained ties in the past few years have shown signs of de-escalation. Direct flights between the two countries have resumed, and tourist visas are once again being issued. These gestures suggest that both nations are willing to stabilize relations despite political differences. India has also been working on regional initiatives such as the Supply Chain Resilience Initiative with Japan and Australia, which aims to reduce dependence on Chinese imports over the long term.
The recent friction with the United States has given India stronger reasons to maintain economic links with China. First, the tariff disruptions from Washington have created the need for India to find alternative markets and suppliers. Strengthening trade with China could help cushion the immediate impact on exports and imports.
Second, India has long promoted the idea of strategic autonomy. By not fully aligning with either the US or China, India tries to maintain room for independent decisions. At a time when the US is using economic pressure as a foreign policy tool, closer engagement with China offers India a balancing option.
Finally, China remains too important in certain supply chains to ignore. From smartphones and electronics to chemicals and industrial machinery, Indian businesses depend heavily on Chinese imports. Cutting these ties in the short term would be highly disruptive and costly for India’s industries and consumers alike.
Despite the need to keep trade channels open, India’s relationship with China has built-in limits. Border disputes remain unresolved and continue to create mistrust between the two sides. Issues such as China’s hydropower projects near shared rivers also raise concerns about long-term security and water resources.
India is also actively working to reduce its reliance on Chinese supply chains. Initiatives with Japan, Australia, and other Indo-Pacific allies are designed to diversify imports and encourage more manufacturing within India itself. The “Atmanirbhar Bharat” or self-reliant India program further reflects the political push to avoid excessive dependence on any single foreign partner.
Domestic politics also play a role. Public opinion often views China with suspicion, especially after border clashes in recent years. This creates pressure on policymakers not to appear overly dependent on Beijing, even if economic realities demand continued trade.
In the short term, over the next 12 to 18 months, India is expected to continue using tax relief and stimulus measures to protect its economy from the loss of export revenues caused by US tariffs. Trade with China could see a moderate increase during this period, particularly in non-strategic areas where dependence already exists. At the same time, policymakers are likely to move cautiously, ensuring that economic engagement does not compromise national interests.
In the medium term, over the next one to three years, India will likely deepen partnerships with Japan, Australia, and other allies in the Indo-Pacific. This will support the goal of building more resilient supply chains and reducing the dominance of Chinese imports. Bilateral trade with China may not grow dramatically during this time, but it is unlikely to decline sharply either.
In the longer term, beyond three years, India’s foreign policy will continue to revolve around the principle of strategic autonomy. The country will attempt to maintain stable trade ties with both China and the United States, using its growing market size and demographic strength to negotiate better terms. A middle path is likely, where India does not choose sides but instead leverages both relationships for its own development.
India’s trade relations with China is caught in the crosscurrents of US economic pressure, domestic priorities, and regional strategy. The United States’ decision to impose 50 percent tariffs has disrupted established economic flows and forced India to seek new options. While short-term trade with China may increase as a counterbalance, long-term strategy is moving toward diversification and self-reliance.
Despite mistrust and political sensitivities, the sheer scale of economic interdependence suggests that India’s trade with China will survive. It may not expand unbounded, but it is unlikely to collapse under US pressure either. The story of the coming years will be one of careful balancing, where India uses its position as a rising power to manage relations with both Washington and Beijing.