India joins the China trade war: From rivalry to realignment.

India joins the China trade war: A strategic US alliance to reshape global trade

As the geopolitical chessboard continues to shift, a significant development has emerged in international trade. India has stepped up to align more closely with the United States, forming a strategic partnership aimed at curbing China’s economic overreach. This development, grounded in both economic necessity and political foresight, marks a new chapter in the ongoing trade war between the United States and China, with global implications.

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Escalating trade tensions: The tariff offensive

The United States has recently taken a more aggressive stance in its trade war with China, increasing tariffs from 54% to an eye-watering 245%. These measures are not solely punitive; they are strategic, aiming to thwart attempts by China to bypass tariffs through third-party nations. The goal is to cut off any potential economic escape routes China may exploit, thereby forcing compliance and a recalibration of trade dynamics.

In retaliation, China has escalated the matter to the international stage, accusing the US of “economic bullying” and requesting a United Nations Security Council meeting to address what it deems as violations of international trade rules. The move, perceived by many as ironic given China’s own record of economic coercion and regional dominance, reflects Beijing’s deepening concern over its diminishing influence and mounting isolation.

India’s strategic realignment

India’s recent trade manoeuvres, which include increasing tariffs on Chinese imports, particularly steel and committing to boost imports from the United States, underscore a decisive pivot. The decision followed a landmark visit by US Vice President JD Vance and signals India’s intent to strengthen economic ties with Washington while distancing itself from Beijing’s shadow.

This strategic realignment is not merely reactive. It’s a forward-thinking economic policy rooted in mutual benefit. The newly announced trade terms although not yet a full agreement represent a framework for future negotiations, aimed at doubling bilateral trade to US$500 billion by the end of the decade. This initiative is part of a broader plan to create resilient supply chains, generate employment, and ensure economic security for both nations.

Steel, subsidies, and sovereignty

A key battleground in this economic conflict is the global steel industry. The Chinese Communist Party (CCP) has long been accused of flooding international markets with artificially cheap steel, sustained through massive state subsidies. This strategy has decimated local industries in various countries, undercutting competitors and posing a threat to national industrial capabilities.

India’s imposition of a 12% tariff on Chinese steel is a direct countermeasure. It seeks to protect its domestic industry from the economic distortion caused by Chinese overproduction. More importantly, it mirrors similar moves by the US and UK, which have also taken steps to prevent Chinese dominance in critical industries. These actions collectively reflect a growing consensus on the need to resist China’s manipulative trade practices.

Technology, retail, and trade barriers

The US-India economic partnership is not limited to raw materials. It extends into sectors like e-commerce and technology. A prominent example is Walmart’s acquisition of Flipkart, a move that faced regulatory hurdles when India changed its laws to restrict foreign retailers. The US sees such changes as barriers to fair trade and is advocating for greater access for American companies to India’s lucrative e-commerce market.

President Trump and Vice President Vance have both stressed the need for reciprocal market access, criticising historical US leadership for not securing better terms for American businesses. The current administration appears determined to reverse that trend, using the weight of the US consumer market as leverage.

China’s fading influence and desperate diplomacy

Beijing, recognising its growing isolation, has launched a diplomatic charm offensive aimed at courting regional neighbours like Vietnam, Cambodia, and Malaysia. However, these efforts have largely faltered. Despite China’s overtures, including offers of “deals that cannot be refused”, many nations remain wary of its intentions.

Vietnam’s recent purchase of US F-16 fighter jets shortly after a visit from Xi Jinping exemplifies this skepticism. Even as China tries to present itself as a benign partner, its aggressive posturing in the South China Sea and documented interference in foreign domestic affairs—such as the Canadian elections—undermine its credibility.

The CCP’s attempt to form an anti-US bloc has also stumbled. False reports about trilateral cooperation with South Korea and Japan were swiftly refuted by both nations, exposing the propaganda-driven nature of China’s diplomatic efforts.

Rare earths and retaliation: China’s double-edged sword

In response to tightening restrictions and inspections on its trade practices, China has retaliated by banning the export of rare earth elements, critical components for advanced technology to countries that support US sanctions or policies. South Korea, for instance, faced such restrictions after it exposed Chinese attempts to evade tariffs via relabelling and rerouting exports.

This retaliatory strategy, however, may backfire. Countries are increasingly viewing China as an unreliable partner, accelerating efforts to diversify supply chains and invest in domestic alternatives. The rare earth ban highlights China’s dependence on coercive tactics, which only serve to reinforce the global pivot away from Beijing-centric trade.

The bigger picture: A rewired global trade order

What we are witnessing is not just a skirmish between two economic superpowers but a redefinition of the global trade order. The United States, leveraging its market size and diplomatic capital, is building a coalition of countries willing to adopt a common approach to trade with China. This includes agreeing to not facilitate China’s tariff evasion strategies and enforcing international trade laws more strictly.

India, by stepping into this role, is positioning itself as a central player in the new economic architecture. Its large consumer base, growing industrial capacity, and strategic geographic location make it a valuable ally to the United States. In return, India gains access to capital, technology, and political support—elements crucial for its ascent as a global economic power.

An alliance for the future

The evolving US-India partnership is emblematic of a broader trend: countries are increasingly choosing sides in a global struggle defined not just by economics, but by governance, sovereignty, and strategic values. While China continues to rely on coercion and state-driven capitalism, India and the United States are forging a model based on mutual respect, legal frameworks, and democratic principles.

This realignment is not without risks or challenges, but it offers a blueprint for a more balanced, transparent, and resilient global economy. In the face of China’s faltering attempts to dominate the global trade system, the alliance between the United States and India stands out as a potent counterforce—one that could reshape the future of international commerce for decades to come.

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