India’s nascent rapprochement with China is being derailed by two Ts: tariffs and terrorism. When both countries announced their border agreement in October last year, there were limited expectations of a lasting reconciliation. The disengagement from two contested areas in the Himalayas fell well short of a de-escalation or de-induction of military forces along their disputed border. Nor did the agreement resolve any of the underlying grievances about territorial claims or water disputes, which threaten to flare up amid plans by Beijing to construct the world’s largest hydroelectric dam along the Brahmaputra River that traverses both countries.
And yet efforts to reset relations moved at a rapid pace with the resumption of the Special Representatives framework in December (after it last convened in 2019), plans to resume “people-centric” initiatives, including direct flights and the Kailash-Mansarovar Yatra (or pilgrimage), and positive rhetoric on both the Chinese and Indian side about improving the bilateral relationship.
The fragility of ties becomes evident when looking at the two key foreign policy issues facing India right now: the Trump administration’s trade policies, and the fallout from last week’s terrorist attack in Kashmir. In both cases, there is a distinct China angle that threatens to sour relations between Beijing and New Delhi.
Tariff trouble
India’s approach to the Trump administration’s tariff policy has been opposite to that of China, with an emphasis on appeasement rather than confrontation. In the hope of evading the 26% tariff that Washington imposed on India (which subsequently dropped to 10% for 90 days), New Delhi has pledged to improve market access by concluding a bilateral trade agreement with the United States. It has also offered to roll back tariff and non-tariff barriers and buy more American products to address Trump’s chronic obsession with the trade imbalance.
Lurking in the background, however, is the “China factor”.
In doing so, India also hopes to benefit from potential trade diversion away from China. While the Trump administration’s primary focus is to create more jobs at home and reindustrialise the US economy, in the interim it appears willing to accept a relocation of production (and jobs) to friendly countries, including India. Hence, reports that Apple is relocating production of iPhones for the US market from China to India. Other US companies are doing the same amid efforts to leverage the benefits offered by India’s “Production-linked Incentive” (PLI) scheme.
However, leveraging these advantages is contingent on Indian supply-chains not being heavily dependent on China. The nascent Sino-Indian rapprochement was accompanied by recognition that India would need to depend on components and raw materials sourced from China. Visa processes have been expedited while both countries have explored selective joint venture opportunities with Chinese companies. However, these efforts have slowed as India is forced to pick sides in the US-China economic rivalry, choosing the United States for now.
Terrorism threats
On terrorism, India’s focus is on Pakistan’s alleged complicity in the terrorist attack that claimed the lives of 26 civilians near Pahalgam in Jammu and Kashmir on 22 April. Lurking in the background, however, is the “China factor”. China is a party to the Kashmir dispute through its claim to Eastern Ladakh/Aksai Chin and control over the Shaksgam/Trans-Karakoram Tract that Pakistan handed over to China in 1963.
China condemned the attack but stopped short of offering support to India, while reassuring Pakistan, its “ironclad friend”. In the past Beijing has also blocked several efforts to have Pakistan-based terrorists declared “Global Terrorists” at the United Nations.
This serves as a reminder that China is Pakistan’s primary benefactor. More than 80% of Pakistan’s arms imports came from China in the period from 2020 to 2024. Beijing is also responsible for Pakistan’s nuclear weapons program and is reportedly expediting the delivery of several defence platforms, including the JF-17 fighter and PL-15 air-to-air missile as Islamabad prepares for a possible conflict with India.
The border clashes between China and India in 2020 also played an indirect role in last week’s terrorist attack, as it forced New Delhi to redeploy military assets from the Kashmir Valley (where the terrorist attack took place) to Eastern Ladakh (on the disputed border with China). This may explain to some extent claims of a security lapse amid the lighter Indian military footprint in the area.
In this context, the terrorist attack serves as a reminder that despite efforts to de-escalate tensions along their disputed border, China continues to pose a security threat to India from its support to countries with which India has difficult relations. This includes Pakistan, but also Bangladesh, with whom New Delhi’s ties have soured since the government of Sheikh Hasina was ousted last year in August. More than 70% of Bangladesh’s arms imports have come from China in the period from 2019 to 2023. Although this predates the change of government in Dhaka, bilateral relations between Bangladesh and China have deepened over the last eight months. Bangladesh’s interim leader Mohammed Yunus visited China recently where he made several provocative statements while deepening relations with Beijing.
All this alludes to a point I make in a recently published research paper: That the border issue is merely a symptom of a much broader and deeper geopolitical rivalry between China and India.
As these two self-proclaimed civilisational states – the world’s most populous countries, accounting for 40% of the world’s population, and the second (China) and soon to be third (India) largest economies – become increasingly prominent geopolitical actors with more tools and platforms to project power, their rise is introducing new stages of rivalry. Move over US-China relations, this is the real 21st century geopolitical contest.
