Dragon and Elephant in Step: India-China Recalibration Amid Global Economic Shifts

In a rare moment of strategic convergence, India and China appear to be recalibrating their decades-long strained relationship, driven not by ideological alignment but by the pressing need to offset economic disruptions triggered by global trade tensions. The thaw comes in the wake of punitive tariffs imposed by the United States under the Trump administration, which are expected to impact nearly $48 billion in exports from both Asian giants. This shared vulnerability has nudged Beijing and New Delhi toward a pragmatic détente, even as unresolved border tensions and geopolitical rivalries continue to simmer beneath the surface.

China, facing the brunt of Washington’s aggressive tariff regime, responded with defiance, crafting a counter-strategy that included outreach to regional powers. In March, as the U.S. began taxing Chinese goods, Chinese Foreign Minister Wang Yi extended an olive branch to India, urging it to “take the lead in opposing hegemonism and power politics.” His metaphor—“making the dragon and elephant dance is the only right choice”—was not just poetic diplomacy but a signal of Beijing’s intent to forge a united Asian front against Western economic coercion.

However, the momentum was disrupted by the Pahalgam terrorist attack, allegedly backed by Pakistan, which prompted India’s retaliatory Operation Sindoor. China’s tacit support for Islamabad during this episode forced New Delhi to tread cautiously on the Chinese front. While India refrained from directly blaming Beijing, the diplomatic chill was palpable. Yet, the strategic calculus remained unchanged: both nations understood that economic interdependence and regional stability were too critical to be sacrificed at the altar of episodic hostility.

The recent statements by the Indian Prime Minister in Japan underscore this shift. Acknowledging the volatility in the global economy, he emphasized the need for India and China to collaborate in stabilizing the world economic order. He noted India’s readiness to advance bilateral ties from a “strategic and long-term perspective on the basis of mutual interest.” This framing is significant—it moves beyond transactional diplomacy and gestures toward a more durable framework of engagement.

One such area of mutual interest is the Electric Vehicle (EV) industry, which relies heavily on rare earth minerals—resources that China dominates and India seeks access to. Wang Yi’s visit to Delhi earlier this month, his first in three years, included assurances of cooperation in this sector. With both nations housing massive consumer markets and manufacturing bases, a coordinated push in EV production could not only buffer the impact of U.S. tariffs but also position Asia as a global hub for green technology.

The economic rationale for rapprochement is compelling. India and China together represent over 35% of the world’s population and nearly 18% of global GDP. Their combined markets offer scale, labor, and innovation potential that few regions can match. As both countries seek to diversify export destinations and reduce dependence on Western economies, bilateral trade and joint ventures become strategic imperatives. In 2024 alone, India-China trade crossed $135 billion, despite military standoffs and diplomatic frost. This resilience suggests that economic logic often prevails over political rhetoric.

Yet, seasoned observers caution against over-enthusiasm. India, they argue, should adopt a posture of quiet strength rather than effusive praise. Beijing respects strategic clarity and long-term consistency more than symbolic gestures. The Chinese diplomatic tradition values patience and layered negotiation, and India’s challenge is to engage without appearing either submissive or erratic. The upcoming SCO summit, where Prime Minister Modi is expected to meet President Xi Jinping, will be a litmus test of this approach.

The long-term implications of this recalibration are profound. If sustained, it could reshape regional alliances, dilute Western dominance in trade architecture, and create a new axis of economic cooperation in Asia. However, the durability of this thaw depends on how both nations manage their strategic contradictions—border disputes, Pakistan-China ties, and competition in regional influence. The court of global opinion may welcome the détente, but the real verdict will lie in how effectively India and China translate mutual interest into institutional trust and economic synergy.

In the end, the dragon and elephant may indeed dance—but only if both learn to move in rhythm without stepping on each other’s toes.