Influencing G2 truce to Delhi’s advantage

For India, the US-China détente is both a pause and a test — a pause in global trade tensions, and a test of whether New Delhi can convert that calm into advantage

- Duvvuri Subbarao

At their summit in Korea last week, Donald Trump and Xi Jinping declared a one-year truce in their trade war. Markets rallied, commodity prices steadied, and business lobbies exhaled.

But the truce also set off quiet unease, especially in New Delhi. India had been hoping that the hostility between the US and China would create space for a deeper trade partnership with Washington. Now, with the G2 choosing détente over confrontation, at least temporarily, the strategic and economic calculus has shifted.

China could afford to fight back. When Washington raised tariffs, Beijing retaliated. When the US restricted semiconductor exports, China struck back by curbing rare-earth exports critical for American manufacturing and defence industries. America discovered that it was hostage to Chinese supply chains more than it thought.

India doesn’t have that kind of leverage. America’s trade deficit with India accounts for just 3.2% of its total deficit; China's share is nearly 30%. That gap in economic heft translates into negotiating power. China could escalate to negotiate; India cannot. The asymmetry is unavoidable — and it shapes any realistic assessment of how the Trump-Xi truce will affect India’s trade prospects. For India, the implications are mixed.

The truce could be an opportunity if the US uses this breathing space to consolidate its trade regime and strengthen its security architecture, especially in the Indo-Pacific. A calmer US-China relationship gives Washington the bandwidth to pursue economic diversification without the constant distraction of battling China for economic and geopolitical supremacy. In that scenario, India could still feature prominently — both as a strategic partner and as an alternative node in global supply chains.