Reeling from Trump's tariffs, India and China seek a business reboot

August 31, 2025

Prime Minister Narendra Modi's visit to China comes at a critical time as both nations face economic challenges from US tariffs, with India recently hit by 50% tariffs on exports like diamonds and prawns. The leaders of the world's two most populous countries appear to be seeking a reset in their historically mistrustful relationship amid shared economic interests. Despite being economic powerhouses (the world's fifth and second-largest economies respectively), their relationship remains complicated by unresolved territorial disputes and border tensions dating back to the 2020 violence in Ladakh's Galwan Valley.

Who is affected

Indian exporters and businesses facing 50% US tariffs on goods like diamonds and prawns
China's economy, which is described as "sluggish" and threatened by US tariffs
Indian and Chinese citizens affected by visa restrictions and limited direct flights
Companies impacted by India's ban on over 200 Chinese apps, including TikTok
Infrastructure projects in India slowed by restrictions on Chinese investments
Consumers and businesses in both countries who could benefit from potential economic cooperation

What action is being taken

Prime Minister Modi is visiting China for the Shanghai Co-operation Organisation (SCO) meeting
Direct flights between India and China are being resumed
Both countries are exploring possible relaxations on visas
Modi is leveraging other regional alliances, stopping in Japan on his way to China
Both nations are participating in multilateral frameworks like BRICS and SCO to reduce dependence on Western economic systems
The leaders are engaging in dialogue to potentially improve bilateral relations

Why it matters

India and China represent the world's fifth and second-largest economies respectively, with India projected to become the third-largest by 2028
The relationship between these economic giants impacts global trade patterns and supply chains
Cooperation could leverage complementary strengths: China's manufacturing, India's service sector, and reduced dependence on the United States
Improved relations could reshape regional stability in Asia
Enhanced economic cooperation could benefit both nations facing challenges from US tariffs
The meeting signals India's multi-aligned foreign policy approach rather than exclusive Western alignment
Potential economic partnerships could serve massive consumer markets (2.8 billion people combined)

What's next

No explicit next steps stated in the article

Read full article from source: BBC