The Complex Relationship Between the People’s Republic of China and the United States of America:  Economic ,Political and Strategic Implications for India

Author – Sejal Verma , Anirudh Gupta

1. Abstract

The relationship between the United States (US) and the People’s Republic of China (PRC) is a defining factor in global geopolitics, with profound economic, political, and technological implications. This article examines the multifaceted dynamics of US-China relations, focusing on their trade war, geopolitical competition, and technological rivalry, and their impact on India’s economy and strategic positioning. While the US-China trade conflict and decoupling efforts create opportunities for India to attract foreign investment and enhance its manufacturing sector, they also pose challenges such as trade imbalances, supply chain disruptions, and geopolitical risks. China’s rise as a global superpower, particularly in critical minerals and technology, further complicates India’s strategic calculus. Through a detailed analysis supported by trade and mineral data, this article highlights India’s opportunities and challenges in navigating this multipolar world

2. Introduction

The US-China relationship is a cornerstone of global politics, characterized by economic interdependence, strategic rivalry, and technological competition. As the world’s two largest economies, their interactions shape global trade, security, and innovation. For India, a rising power with its own regional and global ambitions, the evolving US-China dynamic presents both opportunities and challenges. India’s economy, heavily reliant on exports and foreign investment, is influenced by disruptions in global supply chains, shifts in trade policies, and regional geopolitical tensions. This article explores the economic and political dimensions of US-China relations, with a particular focus on their trade war, China’s dominance in critical minerals, and the implications for India’s economic growth, technological advancement, and strategic partnerships. By analyzing key data and trends, the article aims to provide a comprehensive understanding of how India can navigate this complex landscape.

3. Geopolitical Competition: A Shifting Global Order

3.1. US-China Rivalry in the Indo-Pacific

The strategic competition between the US and China in the Indo-Pacific region is a central driver of global geopolitics. The US, a long-standing Pacific power, seeks to maintain its influence through alliances and freedom of navigation operations (FONOPs) in contested areas like the South China Sea. China, asserting its territorial claims and expanding its naval capabilities, views the US presence as a containment strategy. This rivalry shapes India’s foreign policy, as both powers vie for influence in South Asia and the Indian Ocean region.

India has deepened its strategic partnership with the US, driven by shared concerns about China’s assertiveness, particularly along the India-China border. Initiatives like the Quadrilateral Security Dialogue (Quad), involving the US, India, Japan, and Australia, reflect this alignment. However, India must balance its strategic autonomy with its economic ties to China, creating a delicate diplomatic challenge.

3.2. South China Sea: A Flashpoint for Conflict

The South China Sea disputes exemplify the US-China strategic competition. China’s expansive claims and militarization of artificial islands have raised tensions with neighboring countries and the US, which conducts FONOPs to challenge these assertions. For India, stability in the South China Sea is critical, as it relies on these maritime routes for trade and energy imports. Escalating tensions could disrupt regional stability, affecting India’s economic and security interests.

4. Economic Interdependence and the Trade War

4.1. US-China Trade Dynamics

The US and China have long been economically interdependent, with China serving as the world’s manufacturing hub and the US as a major consumer market. However, this relationship has been strained by trade imbalances, with the US running a significant trade deficit with China. In April 2025, the US imposed tariffs of up to 125% on Chinese imports, prompting China to retaliate with tariffs of 84% on US goods, including agriculture and machinery. These tit-for-tat measures have escalated the trade war, disrupting global supply chains and affecting third countries like India.

Table 1: USA-China Trade War Overview (April 2025)

Source: Compiled from references [1-5].

4.2. China’s Economic Resilience

Despite the trade war, China has diversified its trade partnerships, reducing its reliance on the US market from 20% to less than 15% of its exports since 2018. Chinese manufacturers have expanded operations in countries like Vietnam and Cambodia to circumvent US tariffs. Additionally, China’s advancements in AI, semiconductors, and critical minerals bolster its economic resilience, making it a formidable player in global trade.

5. China’s Dominance in Critical Minerals

5.1. Strategic Importance of Rare Earths

Rare earth elements (REEs) are critical for high-tech industries, including electronics, electric vehicles (EVs), renewable energy, and defense. China dominates the global supply chain, accounting for 61% of REE production and 92% of processing. In response to US tariffs, China imposed export controls on seven heavy REEs in April 2025, targeting the US defense and manufacturing sectors.

Table 2: Global Share of Key Minerals (2023)

Source: International Energy Agency, US Geological Survey.

5.2. Implications for the US

The US relies on China for 70% of its REE imports, making it vulnerable to supply disruptions. Heavy REEs are essential for defense technologies like F-35 jets and Tomahawk missiles. China’s export controls could lead to shortages, production delays, and higher costs for US manufacturers. Efforts to develop domestic REE production face challenges due to high costs and environmental concerns.

6. Impact on India’s Economy

6.1. Opportunities for Growth

The US-China trade war and decoupling efforts have created opportunities for India to position itself as an alternative manufacturing hub. Key opportunities include:

• Foreign Direct Investment (FDI): Multinational corporations seeking alternatives to China are increasingly investing in India’s manufacturing sector, particularly in electronics and pharmaceuticals.
• Enhanced US-India Trade: Deepening bilateral ties could lead to increased trade and economic collaboration, especially in technology and defense.
• Technological Collaboration: Partnerships with the US and other Quad members can bolster India’s innovation ecosystem, particularly in AI, 5G, and semiconductors.

6.2. Challenges to Overcome

Despite these opportunities, India faces significant challenges:

• Trade Imbalances: India’s trade deficit with China remains a concern, requiring policies to boost domestic production and reduce import dependency.
• Geopolitical Risks: Escalating US-China tensions could destabilize the Indo-Pacific, impacting India’s economic growth and security.
• Supply Chain Disruptions: India’s manufacturing and export sectors are vulnerable to global supply chain disruptions caused by the trade war.

7. China’s Rise as a Superpower

7.1. Economic and Military Ascendancy

China’s rapid economic growth over the past few decades has been underpinned by its manufacturing prowess, technological advancements, and expansive market. Its military modernization, particularly in naval capabilities, has heightened tensions with the US and neighboring countries. China’s assertiveness in territorial disputes, such as the South China Sea and the India-China border, underscores its ambition to dominate the Indo-Pacific.

7.2. Technological Leadership

China’s advancements in AI, 5G, and space exploration position it as a global leader in innovation. Its dominance in critical minerals further enhances its strategic leverage, enabling it to influence global supply chains and technology markets.

7.3. Implications for India

China’s rise poses multifaceted challenges for India:

• Border Security: Ongoing tensions along the India-China border, particularly in Ladakh, remain a significant security concern.
• Regional Influence: China’s Belt and Road Initiative (BRI) and growing influence in South Asia and the Indian Ocean challenge India’s regional aspirations.
• Economic Competition: China’s economic dominance complicates India’s efforts to achieve its developmental goals, particularly in manufacturing and technology.

8. India’s Strategic Response

8.1. Strengthening Strategic Partnerships

India has responded to China’s rise by deepening ties with the US, Japan, and Australia through the Quad. These partnerships enhance India’s defense capabilities and technological collaboration, helping it counterbalance China’s influence.

8.2. Building Economic Resilience

To capitalize on global supply chain shifts, India is implementing policies to boost domestic manufacturing and attract FDI. Initiatives like “Make in India” and production-linked incentives (PLI) aim to enhance India’s competitiveness in sectors like electronics, pharmaceuticals, and textiles.

8.3. Navigating a Multipolar World

India’s foreign policy must balance its strategic partnerships with economic ties to China. Diplomatic agility and investments in technology and infrastructure will be critical for India to maintain its sovereignty and promote its interests in a multipolar world.

9. Conclusion

The US-China relationship is a complex interplay of competition and interdependence, with far-reaching implications for global geopolitics and India’s economy. The ongoing trade war, China’s dominance in critical minerals, and strategic rivalry in the Indo-Pacific create both opportunities and challenges for India. By leveraging its strategic partnerships, enhancing domestic capabilities, and navigating geopolitical risks, India can position itself as a key player in the emerging global order. However, achieving this requires sustained investments in technology, infrastructure, and diplomacy to ensure economic resilience and strategic autonomy.

10. References  

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