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Trump's search for a 'grand bargain' with China: How should India respond?

As Washington grows risk-averse and Beijing gains leverage, the Seoul deal reshapes India's geopolitical space

12 min read
Updated On: Dec 18 2025 | 8:24 PM IST
Shyam Saran
U.S. President Donald Trump and Chinese President Xi Jinping talk as they leave after a bilateral meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, in Busan, South Korea, October 30, 2025 (Photo: Reuters)

U.S. President Donald Trump and Chinese President Xi Jinping talk as they leave after a bilateral meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, in Busan, South Korea, October 30, 2025 (Photo: Reuters)

The United States (US) and China have achieved a temporary pause in their ongoing trade war. In their much-awaited summit in Seoul on October 30, US President Donald Trump and Chinese President Xi Jinping, the Chinese side agreed to suspend its onerous and extraterritorial licensing procedures for the export of rare earths, including processed items and magnets, for one year. The US, in turn, has withdrawn the extension of its entity list to the several thousand subsidiaries of Chinese companies already on the entity list if they had more than 50 per cent of their shares owned by the latter. (The US Department of Commerce maintains a trade restriction list of foreign persons, businesses, research institutions and governments that are believed to be involved in or pose a significant risk of becoming involved in activities deemed contrary to US national security or foreign policy interests. Entities on the list are subject to specific, stringent licence requirements for the export, re-export, or transfer of certain items subject to export control regulations, often leading to the presumption of denial for such transactions.)  China has agreed to purchase soybean from the US, which is important for Trump’s mid-West farming constituency. Both will reciprocally drop the tit-for-tat port charges imposed on ships belonging to the two countries. The US has dropped its restrictions on the export of some categories of advanced semiconductors to China. It had imposed a 20 per cent additional tariff on China on grounds that it was not doing enough to reduce and eliminate the export of fentanyl to the US (fentanyl is used in the US to illegally manufacture and distribute opioids). This has been cut to 10 per cent in recognition of China’s efforts in this respect though no evidence has been offered to support this determination. With this pause in their trade war, the US dropped its threat of imposing 100 per cent tariffs on all Chinese imports on November 1.
  In a media interaction after the summit, Trump said the issue of Taiwan was not discussed, nor did he demand that China reduce or cease importing oil from Russia. The US had rarely shown such restraint in conversations with China in the past. Despite relentless efforts of senior US officials to convey that the country had greater leverage over China and had achieved a deal more favourable to itself, the outcome marks a clear Chinese success in staring down the Americans. The Chinese have become good students of the longstanding US playbook of using economic and commercial levers to pursue both geoeconomic and geopolitical objectives. The visuals of the meeting between the two leaders showed Trump straining to convey a friendly, positive, and mutually respectful relationship, while Xi appeared cold and indifferent. There is not too subtle a change in the superpower equation, which will inevitably impact geopolitical relations across the world, including in our own Asian region. We do not have to worry so much about a G-2 than a new G-1 in the making. This is not yet a reality, but it is an undeniable trend.
  The Seoul bargain does not indicate a US-China condominium. The confrontation between the number one and number two powers will remain structural but will not preclude tactical adjustments of the kind witnessed in Seoul. The question for India should be whether relations with India could become part of a tactical adjustment. What should one be looking out for?
Since the dawn of the new millennium, US strategic thinking had the following elements:

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  One, the US must continue to be the dominant power globally. It would brook no peer rival. 
  Two, as the centre of gravity of global economic and military power shifted to the Indo-Pacific region, the global dominance of the US necessitated its remaining the pre-eminent power in this emergent crucible of power. This must be distinguished from a strategy of balance of power that would see the US becoming an offshore balancer in Asia. 
Three, in the US pursuit of dominance in the Indo-Pacific, India would be its critical partner. India would pursue policies to constrain Chinese power for its own reasons and this would converge with US strategic objectives. US investment in building up India’s economic, technological, and military security capabilities would, therefore, serve American interests even though there may not be a transactional payoff. This was described by some analysts as “strategic altruism”.
  There was a brief period when the US appeared to flirt with the idea of a G-2. This was during the early years of the Obama presidency (2009-13). But the G-2 as conceived by the US saw China as a “stakeholder” in the US-led international order, for which a series of “strategic reassurances” could be extended to China. But China quickly pocketed the gains and expanded its security parameter to the whole of the South China Sea. For example, this is the period when China began to proclaim the “9-dotted line” as defining China’s territorial jurisdiction. It became obvious that China would contest US dominance in the Indo-Pacific. It is against this background that the Quadrilateral Security Dialogue, or Quad, was revived during Trump’s first term (2017-21) as part of US efforts to contain Chinese power. The notion of a G-2 quickly evaporated.
  India had been deeply worried about the abortive G-2 because neither collusion nor confrontation between the US and China was good for India. In both cases, India’s room for manoeuvre shrinks. For India, the best position is for its own relations with both the US and China being better than the relations between them.
  In light of the above background, what has changed in India’s geopolitical environment under Trump 2.0?
The US still aspires to be the hegemonic global power, but the markers of that hegemony appear to be changing. Trump lays much more emphasis on performative but selective demonstrations of US power. These have been targeted against countries that are unable and/or unlikely to retaliate. This was the case with Iran, whose nuclear facilities were bombed. This is the case in intimidating Venezuela with naval operations off its coastline. There is, by contrast, high caution on risking a confrontation with China on Taiwan.  There is also a reluctance to risk a confrontation with Russia on Ukraine. What is important from India’s standpoint is that the US under Trump is more risk-averse in pursuing an Indo-Pacific strategy vis-à-vis China. That appears to be the case concerning Taiwan, where there is an unwillingness even to reiterate the longstanding policy of “strategic ambiguity” or of leaving China guessing whether the US will retaliate if it (China) were to invade Taiwan. Recent Chinese commentary reflects the perception that the US is no longer committed to the defence of Taiwan, which may have opened the way to its return to Chinese sovereignty either through grey-zone tactics or overt military action.
  The Quad — among India, Australia, Japan, and the US — was an important component of the US’ Indo-Pacific strategy precisely because it included an important non-ally, India, as its key component. The devaluation or demise of the Quad would leave the US military alliance in the Indo-Pacific intact and hence the Quad has relevance only because India is its constituent. Even if Trump decides to come to India for a delayed Quad summit next year, as he seems to have recently hinted, this may be of symbolic value at best. India may already be calculating whether it would not be better for it to let the Quad evaporate as it did in its earlier incarnation. This may impart greater agency to its Asian diplomacy.
  Let us turn to where India figures in the US’ altered perceptions under Trump. Trumpian loyalists like Peter Navarro, senior counselor to Trump, and US Secretary of Commerce Howard Lutnick believe that the US must not make the same mistake building up Indian capabilities as it did with China, thereby creating a formidable rival in the future. Therefore, US strategy should limit India’s rise to great-power status; there is no logic behind “strategic altruism”.
  Even US Secretary of State Marco Rubio’s observation that India should behave as a strategic partner of the US if it expects American support is of a piece with such thinking. The pursuit of more benign US relations with Pakistan points to a reversion to a more longstanding US approach of hyphenating India and its western neighbour. If the emergence of India as a great power is not seen in long-term US interests, then the strategic convergence between India and the US diminishes in salience. We may not be there yet but the direction of travel seems clear. 
  Despite serial reports that India and the US have reached an agreement on a bilateral-trade agreement, no announcement has been made so far. On the purchase of Russian oil, Trump himself has acknowledged that India has been reducing its import progressively. And yet the trade tariffs of 25 per cent and the additional 25 per cent penal tariffs on account of India’s purchases of Russian oil stay in place, causing significant economic losses to India. Does this demonstrate a strategic partnership? What it reflects is a US perception that this acute pressure should lead India to genuflect before Trump just as most other world leaders have been obliged to do. India should publicly accept its subordinate status and behave “as a strategic partner should”, that is align itself with US articulation of its current interests. There is also the implication that the US does not see India as a credible countervailing power to China and may even perceive it as a hindrance to seeking a “grand bargain” with China.
  There are constituencies in the US who have a different perspective on its relations with India than that associated with Trump and his acolytes. This may have eased the renewal of the 10-year Defence Cooperation Framework recently although even Trump may have had an interest in not losing India as a major client of US military hardware. It is learnt that intelligence and anti-terrorism cooperation remain robust. India should continue such cooperation wherever possible because this supports its development objectives. But one should be mindful of the likelihood of this being adversely affected under a mercurial and unpredictable leader in the White House.
  One should not underestimate the impact of the growing hostility against Indian Americans and Indian immigrants within the MAGA (Make America Great Again) constituency in the US. In our densely interconnected world, this is also beginning to reverberate in India. From being the most popular country in India, the US is rapidly losing its appeal though there are no recent polls to demonstrate this. These popular sentiments will inevitably influence state-to-state relations and constrain them. They also tend to linger for an extended period.  
These trends are unlikely to change even if a trade deal is announced tomorrow and the additional oil-related tariffs are withdrawn. While welcoming this respite, our efforts must remain directed towards steady diversification from undue reliance on the US market.
  India will have to reassess its altered position in the still rapidly shifting geopolitical landscape. What does the balance sheet look like now?
  One, an Indo-Pacific strategy that assumed that the US would continue to have a stake in helping India build up its capabilities as a countervailing partner in Asia without demanding reciprocal commitment more akin to an alliance is no longer valid. If India insists on upholding its strategic autonomy, then its strategy must be modified. It needs to significantly expand its overall profile in East and Southeast Asia. It has a network of military arrangements with Japan, Indonesia, Singapore, and Australia. These must be strengthened and consolidated.
  Two, India must reconnect urgently with the dynamic economies of East and Southeast Asia. Having gained confidence through the successful conclusion of free-trade agreements with the United Kingdom, the European Free Trade Area, Australia, and the United Arab Emirates, and being close to clinching similar agreements with the European Union, it should make a bold move to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This has the advantage of having neither China nor the US currently as members. This could play a catalytic role in enabling India’s economy to become globally competitive.
  And three, India should translate its “Neighbourhood First” policy into concrete action on the ground. There is still insufficient appreciation of how indispensable a peaceful and benign periphery is to enabling India’s role on the larger Asian and global stage. Not only must India improve and consolidate its relations with each of its South Asian neighbours, it must also articulate a vision for regional integration. This is what Atal Bihari Vajpayee as Prime Minister had done at the 11th summit of the South Asia Association for Regional Cooperation (Saarc) in 2002, when he proposed a customs union, a common currency, and a directly elected South Asian Parliament. If India opts out of Saarc, then China could well step in and lead regional cooperation in South Asia sans India. It convened a meeting with Afghanistan, Pakistan, and Nepal in July 2020 to build “four-party cooperation”, and a trilateral with Pakistan and Bangladesh in June this year.
  There is also the looming threat of ecological degradation and climate change afflicting South Asia, which cannot be dealt with except through regional collaboration. And only India, as the largest South Asian country, can lead such collaboration. The time has come to see our neighbours, including Pakistan, as an opportunity for India rather than as a distraction.
  Trump is fond of talking about having cards to play in the geopolitical game. India, too, has powerful cards to play. It is the world’s most populous country. It is the fastest-growing large emerging economy. It has a rapidly expanding market. It has an unmatched pool of scientific and technical talent. And, above all, it has an ingrained sense of civilisational identity and a fierce attachment to independent agency in international affairs. The geopolitical churn is a challenge, but it is also opening up places for India to expand its strategic space. What is now required is deft and agile diplomacy. 
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Written By :

Shyam Saran

Shyam Saran is a Honorary Senior Faculty and Member of the Governing Board at Centre for Policy Research. He is a former Foreign Secretary of India and has served as Prime Minister’s Special Envoy For Nuclear Affairs and Climate Change. After leaving government service in 2010, he headed the Research and Information System for Developing Countries, a think tank focusing on economic issues (2011-2017) and was Chairman of the National Security Advisory Board under the National Security Council (2013-15). He is currently Life Trustee of India International Centre, Member of the Governing Board of the Institute of Chinese Studies, a Trustee at the World Wildlife Fund (India) and Member of the Executive Council of the Federation of Chambers of Commerce and Industry (FICCI). He was awarded the Padma Bhushan in 2011 for his contributions to civil service.
First Published: Dec 10 2025 | 7:00 AM IST

In this article : India China tensionUS China trade warTrump tariffs

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