As China and the US explore de-escalation of tariffs and manage differences on tech, India faces hurdles from this managed great power rivalry
Halfway in, the year 2026 has been challenging (to say the least) for the world — marred by renewed inter-state rivalry, weaponization of choke-points, asymmetric warfare using drones, inflationary pressures stifling global growth, etc.
With its issue-based alignments and push for capacity-building to reduce vulnerabilities, India has sought to weather these challenges, whilst sustaining momentum as the world’s fastest-growing major economy.
Moreover, last month’s back-to-back visits by US President Donald Trump and Russian President Vladimir Putin to China highlighted a world order in flux. Amid premature declarations of a ‘G3 world’ led by great powers, Chinese President Xi Jinping’s bilateral meetings with Trump and Putin were clear demonstrations of Beijing’s accrued advantages over Moscow and Washington, D.C.
While the Putin-Xi bilateral yielded little as China seeks more favorable terms for the Power of Siberia 2 pipeline, the Trump-Xi bilateral pertained to the deepening ramifications of trade and tech tensions between China and the US.
In the run-up to Trump’s visit, China and the US staked out competitive positions on a range of contentious issues, including reciprocal tariffs, tech export controls, deployment of investment screening measures, and their respective interests in Taiwan, Ukraine, and Iran. This was also the first bilateral since the October 2025 truce between Trump and Xi over de-escalating tensions on trade and tech issues.
Adding to the speculation was Trump’s repeated allusions to a ‘G2 world’ — a much-discussed bipolar order where China and the US jointly assume the mantle of global governance and engage in occasional ‘grand bargains’ over national interests, spheres of influence, etc. Even during the visit, Xi said that the ‘Thucydides Trap’ was not “inevitable” and asked Trump to explore a “new paradigm for relations between great powers”.
With speculations abound over a ‘grand bargain’ between Trump and Xi, commentators sought to gauge implications across existing contentions (Iran, Ukraine, Taiwan, South China Sea) and other long-term repercussions for the world.
On the latter, sourcing impediments (for semiconductors, rare earths, etc.) have already been caused by the US-China tech rivalry. While nations across the world have been grappling with US export controls on tech components, some nations are also under American pressure to clamp down on the alleged transshipment of AI-relevant components. Similarly, nations have also been impacted by China’s decision to weaponize its control over rare earths as a bargaining chip against the US. Not to mention, the two nations’ long-arm investment screening measures have also reduced the prospects for transnational partnerships in key technology sectors that could benefit from innovation, cross-pollination of ideas, and private-sector funding.
However, this time around, the Trump-Xi bilateral seemingly focused on bilateral issues and essentially served as a follow-up on the October 2025 truce on trade and tech matters. While this meant little for the prophecies of a G2 hold on global governance issues, the focus on bilateral issues reflected a shift in US-China relations.
After a sustained period of rhetorical hostility and stalemates, the push for managing differences on trade imbalances, for example, included China’s commitment to purchase more US agricultural products and aircraft. Moreover, under the ‘Board of Trade’ reportedly discussed at the Trump-Xi bilateral, China and the US are expected to engage in reciprocal tariff reductions and encourage trade in ‘non-sensitive’ areas.
On the tech rivalry front as well, the Trump-Biden-Trump continuity on stemming China’s tech advances is now speculated to be laden with loopholes. The speculation stems from Trump’s suspension of the Biden-era ‘AI Diffusion Rule’ (and the lack of a credible replacement) and ambiguity over legal requirements for export licenses on US-made tech components. Just this month, several Congressional leaders have alleged that the Trump administration “may have inadvertently allowed America’s most advanced AI chips to flow to companies headquartered in China, potentially fueling China’s military capabilities.”
The seeming shift in US-China ties towards managing differences and incremental gains was also recently outlined by US Trade Representative (USTR) Jamieson Greer at the Council on Foreign Relations (CFR). He said that the Trump administration has “just come to terms with the fact that there’s not going to be some giant comprehensive reform of the way the Chinese political system works, including all these economic elements of it… But we can have some managed trade, we can maybe have some reform around the edges of that managed trade in the interest of stability and continued economic peace between our countries.”
This apparent easing of US-China tensions comes in the backdrop of India’s April 2026 exports to the US rising 17.4% month-on-month to USD 8.02 billion. This was the result of a boost in India’s shipments of textiles and engineering goods to the US, which until recently had imposed tariffs of up to 50% on Indian goods.
The potential easing of tariffs under the US-China ‘Board of Trade’ will likely impact this trajectory of India’s exports to the US. Moreover, in labor-intensive sectors such as textiles, garments, carpets, and leather products, the impact could be compounded by the proposed Section 301 tariffs of up to 12.5% on US imports from a list of 54 countries, including India. While the Section 301 tariffs are currently under consultation and the list of identified economies also includes China, it is unclear whether the US-China reciprocal reduction in tariffs in ‘non-sensitive’ areas will also include the same labor-intensive areas that generally focus on consumer goods like garments, footwear, etc.
Adding to the uncertainty is the slow progress on resolving outstanding issues under the India-US trade agreement, the first phase of which is now expected to be finalized by mid-July.
But trade ambiguities aside, India-US defense ties, for instance, have continued to deepen with the Trump administration’s clearance of support packages for India’s fleet of US-made defense platforms and Indian and American military forces engaging in joint readiness exercises. Moreover, the defense dynamic goes beyond these matters given India’s continued integration with America’s defense industrial ecosystem. Over the years, Indian companies have begun manufacturing components for some of America’s most successful military platforms (Boeing’s AH-64 Apache helicopters, Lockheed Martin’s C-130J, etc.).
There are other similar cases of successful convergences on consumer electronics (Apple now makes 25% of its iPhones in India), next-gen tech infrastructure (Google to Build $15B AI Data Centre Hub in India), and even under India’s effort to diversify its energy imports (US was India’s biggest gas supplier in May).
These developments suggest that the broader trajectory of the India-US partnership continues apace, despite some long-standing and new divergences in the trade domain. Interestingly, even under the previous Trump administration (2017-21), the effort to institutionalize such a disposition was evident — with consultative platforms (such as the 2+2 ministerial dialogue) focusing on strategic areas of cooperation.
Under Trump 2.0, the apparent effort to deepen ties across long-standing (defense) and new (energy, tech) convergences is indicative of India’s preferred approach on India-US ties — i.e. to insulate strategic priorities from differences over trade, market access, etc.
Just as India is managing some turbulences in its multifaceted relations with the US, it has similarly sought to go beyond its divergences with China.
Over the past decade, India-China bilateral relations have oscillated between cautious engagement and border conflicts. Between 2015 and 2019, there were a slew of efforts to establish a new modus operandi for the bilateral relations, especially in the trade and investment sphere. This included leader-level engagements in 2015, 2018 and 2019. Despite the alarm that the Doklam crisis in 2017 raised in India, increased trade and investment were still largely seen as mutually beneficial. However, the Galwan Valley clashes in June 2020 challenged that assumption and brought the two neighbours closer to outright conflict. This led to a comprehensive reevaluation of India’s approach towards China, as efforts to fortify infrastructure along the India-China border continued and trade/investment policies were revisited.
With Press Note 3 (PN3), Chinese investments into India came under focus. Although PN3 was originally introduced in April 2020 to prevent opportunistic takeovers during the pandemic, the Galwan Valley clash led to stricter scrutiny of Chinese investment. Other instances included the ban on several Chinese mobile applications and a comprehensive reevaluation of supply chain dependencies on China.
Since then, India has announced significant reforms in a variety of sectors by incentivising domestic production, promoting value addition and indigenous R&D in several sectors, including component manufacturing, drones, solar technologies, semiconductors, space, defence, etc. However, at least in the medium term, India’s plans to strengthen its domestic manufacturing ecosystem remain invariably dependent on Chinese raw materials, electric components, machinery, rare earths, etc.
In response, China has also not shied (as it did in 2024) from imposing informal curbs on the export of fertilizers, rare earths, and tunnel-boring machines to India. While much of these restrictions were lifted in 2025 following bilateral discussions, the curbs had implications for India’s infrastructure projects, automobile/electronics industry and even the agriculture sector.
Such an incremental rapprochement had received impetus from the 2024 bilateral meeting between PM Narendra Modi and President Xi Jinping (on the sidelines of the BRICS Summit in Kazan, Russia) and a bilateral understanding on “maintaining peace and tranquility in the border areas” as an enabler of “gradual normalization of bilateral relations”. This was also gradually followed by easing of business/tourist visas, resumption of flight routes, and joint announcement of religious tourism programs.
However, challenges remain. Earlier this month, China issued sweeping new rules, which will tighten control over overseas deals involving Chinese investors, technology, data, and national security. The State Council published regulations requiring authorisation for the export of restricted Chinese goods, technologies, services, or related data. The new framework further requires explicit approval for cross-border talent transfers in sensitive sectors, further complicating India’s efforts to increase domestic production and integrate itself into global value chains.
Given this complex dynamic, New Delhi is pragmatically and cautiously reopening engagement channels with Beijing to support its capacity-building measures, whilst also safeguarding some critical sectors.
It is in this context that one may view the March 2026 decision by India’s Union Cabinet. Under which, India approved amendments to PN3 to address concerns of global investors and the domestic industry. Instead of mandated government approval on all foreign direct investment (FDI) from countries sharing a land border with India, investors with non-controlling beneficial ownership of up to 10 per cent can now invest without prior government approval, subject to some applicable sectoral caps.
While India has, in many ways, deftly navigated challenges that riddle its dynamic with China and the US, issues with both major powers remain.
On India-US ties, several new irritants had cropped up in the bilateral relationship: Liberation Day tariffs, Trump claiming credit for brokering peace between India and Pakistan, tariffs on India’s energy imports from Russia, etc. Similarly, while recent efforts have sought to “compartmentalize” India-China bilateral relations, significant layers of strain remain, especially the increasing scope of China’s intelligence and defense partnership with Pakistan and divergences over upstream hydroelectric projects.
Moreover, as both the US and China seek to manage their rivalry, India’s preference for a multipolar world may push it to avoid becoming overly dependent on either major powers. With no comparable alternative to the high-value US consumer market for Indian exporters and Indian manufacturers grappling with China’s stranglehold over critical technologies and related components, the ‘India way’ is to attempt to soften the blow that these dependencies may inflict on India’s growth trajectory.
In recent years, this has been reflected in India embracing and reinvigorating new partnerships, especially through its recent trade agreements (with the UK, the UAE, Oman, New Zealand, EFTA, etc.).
Some of these new trade agreements also include long-term investment components, highlighting New Delhi’s push to seek partners that invest in its growth and development trajectory. Moreover, the agreements will help position India as a ‘connector’ economy — i.e. a gateway to other high-value markets, while offering its own dynamic market.
Similarly, on long-term capacity building in critical sectors, India has been deepening tech cooperation with like-minded partners such as Japan, the UK and the UAE. These include joint efforts for linking innovation ecosystems, supply chain resilience programs, etc.
Whereas, on the domestic front, India has also announced long-overdue measures to bolster its capacity on critical tech components and their precursors. This belated push has also included measures to harness its untapped potential in the rare earths production and refining value chain (India reportedly holds the third-largest reserves of rare earths, but contributes less than 1% of global mining output).
In addition, New Delhi has greenlit domestic projects under the India Semiconductor Mission (ISM) and the National Critical Mineral Mission (NCMM), and has also recently announced its USD 815 million, seven-year incentive programme for rare earth magnets. While India deftly navigates its differences with both China and the US, these belated measures will help it proactively de-risk from supply dependencies and bolster long-term capacity building in key areas of next-gen technologies.
In summation, as China and the US explore ways to manage their differences on tech, trade and their broader great-power contest, India is pursuing a multi-pronged approach of renewed trade arrangements, tech partnerships, and domestic capacity-building measures to reduce its strategic vulnerabilities.
Amid speculation over an emergent G3 (Russia–China–US) managing great-power rivalry, Beijing’s strategic advantages place it at the center of today’s competitive multipolarity.
This month’s back-to-back visits by US President Donald Trump and Russian President Vladimir Putin to China may hint at a shifting reality. Some commentators have declared that Beijing is no longer simply balancing relations between Moscow and Washington D.C. Instead, it is increasingly occupying a position at the center of a gradually-emerging ‘G3 world’ — i.e. a combine of Russia, China, and the US managing great power rivalry and global governance issues.
At first, President Trump’s visit — along with an illustrious business delegation representing varied sectors of tech, finance, aviation, etc. — prompted theories of an impending ‘grand bargain’ between China and the US. Indications for which were apparent in the run up to the visit, as the two nations seemingly staked out competitive positions on a range of contentious issues — reciprocal tariffs, tech export controls, investment screenings, Taiwan, Ukraine, Iran, etc.
Even during the visit, speculations were abound especially when President Xi Jinping alluded to the ‘Thucydides Trap’ and sought a “new paradigm for relations between great powers” in his bilateral with Trump.
In recent memory, US-China bilateral meetings have always incurred such speculations of an emergent ‘G2 world’, where China and the US co-assume the mantle of global governance and engage in occasional ‘grand bargains’ over national interests, spheres of influence, etc. In fact, Trump also casually floated the idea last year.
The speculations over G2 also stem from US President Barack Obama and Chinese President Hu Jintao’s understanding for “building a positive, cooperative, and comprehensive US-China relationship” to serve “the interests of the American and Chinese peoples and of the global community.” Those that see merit in such a bilateral combine may point to the Obama administration securing critical support from the Chinese for finalizing the Iran nuclear deal (JCPOA) and the Paris Agreement — as demonstrative examples of great power collaboration on pressing issues of global governance.
Whereas, this time around, the US-China bilateral demonstrated broadening chasms. A simple comparative reading of the American and Chinese readouts on the bilateral confirmed this. While the US readout emphasized the denuclearization of Iran and North Korea, the Chinese document hardly covered those issues.
Instead, the Trump-Xi meeting seemed to be a follow-up on the October 2025 understanding for a truce on trade and tech issues. Thus, far from a meeting of minds on key global issues (and Chinese support for helping the US extricate itself from the Iran war), Trump’s China visit led to some bilateral outcomes with respect to trade, investments, sale of Boeing aircrafts, etc.
With President Putin visiting Beijing shortly after Trump, another major power was added to the ‘grand bargain’ speculations. However, in contrast with the outcomes of the Trump-Xi bilateral (but similar on the pomp and flair), the Putin-Xi bilateral had a greater focus on global governance issues — visibly demonstrating the convergence between Chinese and Russian worldviews.
For instance, the lengthy Russia-China joint statement seemingly criticized the unilateral bent of US foreign policy and American military adventurism.
The statement called out “treacherous military strikes against other countries, the hypocritical use of negotiations as cover for preparing such strikes, the assassination of leaders of sovereign states, the destabilisation of the domestic political situation in these states and the provocation of regime change, and the brazen kidnapping of national leaders for trial”.
Moreover, in an apparent reference to the Iran war and the closure of the Strait of Hormuz, they called on countries to stop "unilaterally" interfering with international trade and supply chains.
However, the Putin-Xi meeting also had a bilateral focus, with the two countries finalizing 40 agreements across domains of trade, education, technology, etc. This was matched with the high symbolism of the visit — as Putin’s 25th visit to China and marking the 25th anniversary of the Sino-Russian Treaty of Friendship (2001).
Nevertheless, commentators were quick to write off the visit (“Putin leaves China empty-handed”) as the set of outcomes did not include a breakthrough on the Power of Siberia 2 gas pipeline. Expected to complement the existing Power of Siberia 1 pipeline, the new pipeline would additionally supply as much as 50 billion cubic meters (per year) of gas from upstream fields in western Siberia to China.
Geopolitically, the significance of the project, which could more than double Russia’s current gas exports to China, pertains to convergent aims for Beijing and Moscow.
For China, it would bolster energy security and reduce dependence on seaborne supplies via hotspots like the Strait of Hormuz. Whereas, for Russia, it would lock-in China as a long-term customer for its energy exports amid continually-escalating transatlantic measures against Russian energy exports and the EU drastically reducing its traditional dependence on Russian energy.
The outsized focus on bilateral considerations seen in both high-profile visits to China render pronouncements of an emergent ‘G3 world’ to be premature. Instead, the Trump-Xi and Putin-Xi meetings were particularly demonstrative of China’s accrued advantages.
In America’s case, China’s advantages range from its hold over critical minerals (chiefly those used in aerospace/defense equipment), China being a major market for US agricultural products (like soybean), to China’s support for Iran (like providing targeting information).
In Russia’s case, China is not just an alternate market for energy, but also a critical source of dual-use tech components amid transatlantic sanctions against Russia’s defense and industrial base. Another demonstration of China’s leverage pertains to the prolonged discussions for the Power of Siberia 2 pipeline, for which China has reportedly pushed for pricing at Russia’s domestic rate (around $120 per 1,000 cubic meters) — i.e. around half of the pricing under the Power of Siberia 1 pipeline.
Beyond these bilateral cases, China has honed advantages with respect to energy resilience and key supply chains. Prominence in these areas bolster China’s position in today’s era of multipolarity, which is marked by the competitive pursuit of economic resilience and tech partnerships driven by supply chain considerations.
While much of the world grapples with the energy shock sparked by the US-Israel war on Iran, China has weathered the crisis relatively well. Apart from reduced oil demand due to rising EV adoption, record deployment of renewables, and shift to coal as a feedstock for chemicals production, China has nearly 1.4 billion barrels of oil reserves — gradually accumulated by importing nearly one million barrels per day (bpd) more than it needed last year.
As a result, while the world grapples with high geopolitical risk premium on energy imports, China’s seaborne crude imports have dropped by 5.5 million bpd (in perspective roughly 5.5% of global demand), from last year’s levels to 8.5 million bpd. This Chinese “energy fortress” — among factors like Emirati and Saudi oil exports bypassing the Strait of Hormuz and record US oil production (estimated to cross 14 million bpd next year) — is being credited as a stabilizing factor against higher energy prices and a deeper supply crunch.
Moreover, with Chinese energy security bolstered, the current spate of energy crisis has also borne opportunities for China’s clean energy sector.
In the 12 months prior to March 2026, China exported $243 billion worth of clean energy tech (solar panels, batteries, EVs). Whereas, in April, as the energy crisis deepened, Chinese passenger EVs and hybrid vehicles surged to 53% of all exports, up 100% over last year’s figures.
Similarly, in April, China exported 60% more solar cells than it did in the same month last year. As a result, about 50 nations have recently set all-time records for Chinese solar imports.
Hence, between today’s oil crises and tomorrow’s new energy imperatives, China holds the cards — regardless of an exclusive G3 or competitive multipolar world.