US trade policy pushes long-standing rivals China and India closer together

In response to the recent tariffs imposed on China by the US, Beijing has moved to implement a 25 per cent import tax on American commodities including cotton; a move which may allow India to take a larger share of the Chinese market.

As reported by CNBC, India has signed contracts to ship 85,000 tonnes of its new season cotton harvest to China. Last week, India also announced plans to increase tariffs on 29 US imports in retaliation to the US decision to include India on its list of countries covered by higher steel and aluminium duties, according to South China Morning Post.

The US also announced the postponement of a high-level dialogue with India scheduled for next week in Washington DC, an announcement which added to already heightened trade tensions between the two sides.

In contrast, China and India’s bilateral trade relations have developed rapidly notwithstanding the border dispute in the Doklam Plateau last year. Chinese President Xi Jinping and Indian Prime Minister Narendra Modi have met twice since April, pledging to strengthen bilateral ties. Since May, China has also made it easier for India to export non-Basmati rice, removed import duties on anti-cancer drugs and agreed to share data that predicts river flows between the two countries during the flood season.

However, tensions between the long-standing rivals remain. As reported by TODAY, the fundamentals of the relationship are unlikely to change, with the following flashpoints continuing to hinder stronger ties: the US$63 million bilateral trade gap between the two sides – India’s largest; India’s hosting of the Dalai Lama and the Tibetan government-in-exile; and India’s reservations over China’s Belt and Road Initiative.