India and China’s agreement to resume direct flights and expand trade and investment marks a pragmatic thaw between two wary neighbours — a move shaped as much by regional border diplomacy as by a shifting global economic backdrop. After years of freeze-and-thaw relations following a deadly 2020 border clash, the two powers have chosen to rebuild commercial ties in a way that reflects mounting external pressures, evolving domestic priorities, and a mutual calculation that economic engagement can blunt strategic risk.
The announcement, made during high-level talks in New Delhi, signals more than a reopening of air routes and visa channels. It is the product of layered political incentives: New Delhi’s search for supply resilience and diplomatic maneuvering under pressure from tighter U.S. trade stances; Beijing’s desire to shore up markets and reassure investors amid slower growth and rising external scrutiny; and a broader global realignment accelerated by the fallout from the Russia-Ukraine war and transatlantic trade tensions. Together, these factors have nudged both capitals toward a careful rebalancing of rivalry and cooperation.
Domestic politics and economic imperatives in India
For India, the calculus has both pragmatic and political dimensions. New Delhi faces immediate economic needs: access to critical inputs such as fertilizers, certain machinery and minerals that underpin infrastructure and industry; stable trade corridors for Indian exporters and manufacturers; and the restoration of tourism and business travel that were curtailed during the pandemic and subsequent tensions. Restoring direct flights and easing trade frictions reduces transaction costs for firms and supports regional supply chains that Indian policymakers are keen to deepen.
At the same time, New Delhi must manage domestic political optics. The government has to show voters and business constituencies that it can secure inputs and investment while preserving national security. Reopening ties provides a way to relieve immediate economic pressure without abandoning a firm stance on territorial integrity — the diplomatic language around the talks emphasised progress on de-escalation and working groups on border management. That dual message helps India project both economic pragmatism and political firmness at home.
China’s internal drivers and external positioning
Beijing’s incentives are complementary. Facing slower growth, constrained export markets in some advanced economies, and tighter U.S. controls over technology channels, China seeks to defend and diversify its economic relationships. Easier access to the vast Indian market — and the resumption of people-to-people flows — helps sustain exports, investment ties and services linkages that China values. Greater cooperation with India can also be framed domestically as evidence of stability on a key frontier, allowing Beijing to focus on longer-term economic priorities.
Politically, China benefits from reduced friction with a major neighbour while keeping core strategic aims — including ties with Pakistan and influence in the region — intact. The diplomatic cadence of mutual visits and border working groups gives Beijing levers to manage escalation risk while salvaging commerce.
Tariffs, sanctions and the war in Ukraine
Beyond bilateral motives, broader geopolitical shocks have accelerated rapprochement. A more protectionist turn in U.S. trade policy — including higher tariffs and an unpredictable tariff regime — has altered the incentives of many states that previously viewed alignment with Washington as the primary hedge. When major demand markets become more uncertain or costly, trading partners naturally look for alternatives or risk-diversifying relationships. In this environment, New Delhi and Beijing see economic engagement with each other as a pragmatic hedge against tariff volatility and supply disruptions stemming from shifting U.S. trade posture.
Separately, fallout from the Russia-Ukraine war has reshaped global alignments in ways that touch both countries. The conflict pushed Russia closer to Beijing, complicated Western energy and commodity flows, and forced countries like India to navigate sanctions, energy security and diplomatic trade-offs. For India, which has continued to procure Russian energy and military supplies, smoothing ties with China helps limit strategic exposure on other fronts. For China, a friendlier relationship with India reduces the odds of encirclement in regional dynamics and creates space for Beijing to manage a more contested global environment.
How the thaw is being operationalised
Practically, the agreements cover resuming direct passenger services, reopening designated border trade points, facilitating visa procedures and setting up expert mechanisms on shared concerns such as cross-border rivers and infrastructure. Reopening flights matters beyond tourism: it eases business travel, accelerates project timelines where joint ventures exist, and restores air-freight options that matter for high-value trade.
Trade facilitation measures and targeted easing on strategic items — in some reports including critical industrial inputs — illustrate how economic diplomacy can be used as targeted leverage. At the same time, both sides have insisted that progress on commerce will not come at the expense of careful, negotiated steps on border delimitation and troop management.
A functional India-China relationship reduces near-term risks of accidental escalation in the Himalayas and creates a template for transactional cooperation even amid strategic competition. For regional economies, improved ties lower the risk premium on cross-border projects and can help unlock trilateral and multilateral initiatives on connectivity and trade. For global firms, the restoration of direct routes and eased transaction channels reduces logistical friction and gives multinationals clearer signalling about operating conditions.
Yet this is not a strategic embrace. Both governments retain deep mutual distrust and will continue hedging — through defence preparedness, diplomatic balancing with other powers, and selective economic decoupling in tech and critical sectors. The rapprochement is best read as a pragmatic truce driven by intersecting immediate needs rather than a wholesale reset of strategic rivalry.
Risks and the political tightrope ahead
The path ahead is narrow. Domestic political constituencies and security establishments in both countries will scrutinise every concession. Economic interdependence can create friction points — from water politics around cross-border rivers to competition for natural resources — that require careful management. Moreover, if external pressures shift again (for example, a sudden escalation in U.S. trade tensions or a new phase in the Russia-Ukraine conflict), the incentive structure that underpinned the thaw could weaken.
For now, however, India and China appear to be choosing a cautious, transactional approach: reopen the economic channels that matter now, institutionalise dialogue on security irritants, and leave the harder strategic reconciliation for another day. The move underscores how domestic needs and global shocks — tariffs, wars and supply-chain stress — are increasingly driving diplomacy in Asia’s most consequential bilateral relationship.
India–China thaw could blunt Trump’s tariff leverage
A warmer India–China relationship would complicate several of the political and policy threads that President Trump relies on — and also create both risks and tactical opportunities for his administration.
First, it would blunt Washington’s economic leverage. The administration’s use of tariffs and trade pressure aims to steer partners toward closer alignment with U.S. supply chains and policy preferences; if New Delhi and Beijing deepen trade and logistical ties as a hedge against tariff unpredictability, that reduces the effectiveness of tariffs as a bargaining chip. Closer India–China commercial links would give both countries alternative routes for critical imports and exports, weakening the stick value of U.S. trade actions and making it harder for the White House to extract concessions through market pressure alone.
Second, improved bilateral ties could complicate domestic political messaging. A central plank of the Trump economic pitch is that tough trade measures protect American jobs by pushing supply chains away from competitors. If India mitigates the local costs of U.S. tariffs by pivoting toward China for inputs or by deepening access to Chinese manufacturing, voters and businesses in key states may see less tangible benefit from tariff-driven policy. That dynamic could undercut the administration’s claim that its trade posture is delivering more resilient onshore manufacturing.
Third, the thaw would reshape strategic calculations that underpin U.S. diplomacy. Washington has cultivated India as a balancing partner in Asia; transactional engagement between New Delhi and Beijing on issues such as energy, minerals or critical equipment complicates that neat alignment. If India signals it will prioritise supply security over geopolitical alignment, the U.S. may face a harder diplomatic task in coordinating technology controls, export limits and multilateral pressure against China. The result could be a more fragmented approach to Asia policy that demands more subtle incentives from Washington rather than blunt pressure.
At the same time, a less combustible India–China relationship offers tactical upside for the Trump administration. Reduced risk of border escalation eases the likelihood of sudden crises that would demand U.S. diplomatic or military attention, allowing Washington to concentrate on economic containment and targeted technology measures. It also opens opportunities to negotiate cooperative arrangements with India — for instance on supply-chain transparency, critical-minerals sourcing or joint standards — that preserve U.S. interests without forcing India into an overtly adversarial posture.
In short, a warmer India–China tie would erode some of the administration’s hard economic levers and complicate political messaging, while creating space for more calibrated diplomatic strategies. The net political impact for President Trump would depend on New Delhi’s balance between short-term economic pragmatism and long-term strategic alignment with Washington.
(Source:www.reuters.com)
The announcement, made during high-level talks in New Delhi, signals more than a reopening of air routes and visa channels. It is the product of layered political incentives: New Delhi’s search for supply resilience and diplomatic maneuvering under pressure from tighter U.S. trade stances; Beijing’s desire to shore up markets and reassure investors amid slower growth and rising external scrutiny; and a broader global realignment accelerated by the fallout from the Russia-Ukraine war and transatlantic trade tensions. Together, these factors have nudged both capitals toward a careful rebalancing of rivalry and cooperation.
Domestic politics and economic imperatives in India
For India, the calculus has both pragmatic and political dimensions. New Delhi faces immediate economic needs: access to critical inputs such as fertilizers, certain machinery and minerals that underpin infrastructure and industry; stable trade corridors for Indian exporters and manufacturers; and the restoration of tourism and business travel that were curtailed during the pandemic and subsequent tensions. Restoring direct flights and easing trade frictions reduces transaction costs for firms and supports regional supply chains that Indian policymakers are keen to deepen.
At the same time, New Delhi must manage domestic political optics. The government has to show voters and business constituencies that it can secure inputs and investment while preserving national security. Reopening ties provides a way to relieve immediate economic pressure without abandoning a firm stance on territorial integrity — the diplomatic language around the talks emphasised progress on de-escalation and working groups on border management. That dual message helps India project both economic pragmatism and political firmness at home.
China’s internal drivers and external positioning
Beijing’s incentives are complementary. Facing slower growth, constrained export markets in some advanced economies, and tighter U.S. controls over technology channels, China seeks to defend and diversify its economic relationships. Easier access to the vast Indian market — and the resumption of people-to-people flows — helps sustain exports, investment ties and services linkages that China values. Greater cooperation with India can also be framed domestically as evidence of stability on a key frontier, allowing Beijing to focus on longer-term economic priorities.
Politically, China benefits from reduced friction with a major neighbour while keeping core strategic aims — including ties with Pakistan and influence in the region — intact. The diplomatic cadence of mutual visits and border working groups gives Beijing levers to manage escalation risk while salvaging commerce.
Tariffs, sanctions and the war in Ukraine
Beyond bilateral motives, broader geopolitical shocks have accelerated rapprochement. A more protectionist turn in U.S. trade policy — including higher tariffs and an unpredictable tariff regime — has altered the incentives of many states that previously viewed alignment with Washington as the primary hedge. When major demand markets become more uncertain or costly, trading partners naturally look for alternatives or risk-diversifying relationships. In this environment, New Delhi and Beijing see economic engagement with each other as a pragmatic hedge against tariff volatility and supply disruptions stemming from shifting U.S. trade posture.
Separately, fallout from the Russia-Ukraine war has reshaped global alignments in ways that touch both countries. The conflict pushed Russia closer to Beijing, complicated Western energy and commodity flows, and forced countries like India to navigate sanctions, energy security and diplomatic trade-offs. For India, which has continued to procure Russian energy and military supplies, smoothing ties with China helps limit strategic exposure on other fronts. For China, a friendlier relationship with India reduces the odds of encirclement in regional dynamics and creates space for Beijing to manage a more contested global environment.
How the thaw is being operationalised
Practically, the agreements cover resuming direct passenger services, reopening designated border trade points, facilitating visa procedures and setting up expert mechanisms on shared concerns such as cross-border rivers and infrastructure. Reopening flights matters beyond tourism: it eases business travel, accelerates project timelines where joint ventures exist, and restores air-freight options that matter for high-value trade.
Trade facilitation measures and targeted easing on strategic items — in some reports including critical industrial inputs — illustrate how economic diplomacy can be used as targeted leverage. At the same time, both sides have insisted that progress on commerce will not come at the expense of careful, negotiated steps on border delimitation and troop management.
A functional India-China relationship reduces near-term risks of accidental escalation in the Himalayas and creates a template for transactional cooperation even amid strategic competition. For regional economies, improved ties lower the risk premium on cross-border projects and can help unlock trilateral and multilateral initiatives on connectivity and trade. For global firms, the restoration of direct routes and eased transaction channels reduces logistical friction and gives multinationals clearer signalling about operating conditions.
Yet this is not a strategic embrace. Both governments retain deep mutual distrust and will continue hedging — through defence preparedness, diplomatic balancing with other powers, and selective economic decoupling in tech and critical sectors. The rapprochement is best read as a pragmatic truce driven by intersecting immediate needs rather than a wholesale reset of strategic rivalry.
Risks and the political tightrope ahead
The path ahead is narrow. Domestic political constituencies and security establishments in both countries will scrutinise every concession. Economic interdependence can create friction points — from water politics around cross-border rivers to competition for natural resources — that require careful management. Moreover, if external pressures shift again (for example, a sudden escalation in U.S. trade tensions or a new phase in the Russia-Ukraine conflict), the incentive structure that underpinned the thaw could weaken.
For now, however, India and China appear to be choosing a cautious, transactional approach: reopen the economic channels that matter now, institutionalise dialogue on security irritants, and leave the harder strategic reconciliation for another day. The move underscores how domestic needs and global shocks — tariffs, wars and supply-chain stress — are increasingly driving diplomacy in Asia’s most consequential bilateral relationship.
India–China thaw could blunt Trump’s tariff leverage
A warmer India–China relationship would complicate several of the political and policy threads that President Trump relies on — and also create both risks and tactical opportunities for his administration.
First, it would blunt Washington’s economic leverage. The administration’s use of tariffs and trade pressure aims to steer partners toward closer alignment with U.S. supply chains and policy preferences; if New Delhi and Beijing deepen trade and logistical ties as a hedge against tariff unpredictability, that reduces the effectiveness of tariffs as a bargaining chip. Closer India–China commercial links would give both countries alternative routes for critical imports and exports, weakening the stick value of U.S. trade actions and making it harder for the White House to extract concessions through market pressure alone.
Second, improved bilateral ties could complicate domestic political messaging. A central plank of the Trump economic pitch is that tough trade measures protect American jobs by pushing supply chains away from competitors. If India mitigates the local costs of U.S. tariffs by pivoting toward China for inputs or by deepening access to Chinese manufacturing, voters and businesses in key states may see less tangible benefit from tariff-driven policy. That dynamic could undercut the administration’s claim that its trade posture is delivering more resilient onshore manufacturing.
Third, the thaw would reshape strategic calculations that underpin U.S. diplomacy. Washington has cultivated India as a balancing partner in Asia; transactional engagement between New Delhi and Beijing on issues such as energy, minerals or critical equipment complicates that neat alignment. If India signals it will prioritise supply security over geopolitical alignment, the U.S. may face a harder diplomatic task in coordinating technology controls, export limits and multilateral pressure against China. The result could be a more fragmented approach to Asia policy that demands more subtle incentives from Washington rather than blunt pressure.
At the same time, a less combustible India–China relationship offers tactical upside for the Trump administration. Reduced risk of border escalation eases the likelihood of sudden crises that would demand U.S. diplomatic or military attention, allowing Washington to concentrate on economic containment and targeted technology measures. It also opens opportunities to negotiate cooperative arrangements with India — for instance on supply-chain transparency, critical-minerals sourcing or joint standards — that preserve U.S. interests without forcing India into an overtly adversarial posture.
In short, a warmer India–China tie would erode some of the administration’s hard economic levers and complicate political messaging, while creating space for more calibrated diplomatic strategies. The net political impact for President Trump would depend on New Delhi’s balance between short-term economic pragmatism and long-term strategic alignment with Washington.
(Source:www.reuters.com)