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The recent meeting between Presidents Trump and Xi in Busan has delivered what was described by the US President as a ‘12-out-of-10’ outcome. Washington agreed to reduce some tariff rates and amend certain sanction regimes, while Beijing paused its rare earth controls and promised more agricultural purchases and greater action on fentanyl.
Both sides framed the meeting as a win for their leader. Markets exhaled with cautious relief, but the larger question remains: does this truce mark a genuine thaw in geopolitical frost, or is it simply a pause in a marathon of managed confrontation?
From shore to shore
Businesses across Asia have been repeatedly tested by these tensions throughout the last few years. No single or uniform response has been most effective. Reshoring, nearshoring, friendshoring, and now splitshoring have all been pursued to manage supply risk and strengthen production resilience.
One of the main beneficiaries of this process has been India, which increasingly has become an investment destination for companies looking to hedge risk in their supply chains and manufacturing facilities.
Should trade tensions between the US and China stabilise, this continued hedging into markets such as India and parts of Southeast Asia may get revisited. To make those decisions, companies will need both a deep national lens and a wide geopolitical aperture. The first layer is granular and key to understanding how policy, regulation, and market behaviours evolve inside an economy. The second is panoramic, focused on mapping how new regional blocs and intergovernmental forums are reshaping the operating environment.
China tries to tackle deflation
China’s, recent announcements about the fifteenth Five Year Plan shows the country is looking to shift its approach to economic growth. Facing excess capacity and damaging domestic price wars, Beijing is looking to adopt an “antiinvolution” approach: curbing excessive competition and pushing forward consolidation in sectors from electric vehicles to solar. Alongside this is a drive to create a more unified national market to break provincial silos and reduce operating friction for companies. Both moves aim to restore confidence, but face headwinds from weak consumption and a debt-laden property sector.
As a result, multinational companies operating in China should assume an ever-tighter level of industrial policy in guiding economic policy. Investment decisions should align with provinces that are making progress in implementing unified market rules.
India’s rise, with seams
While China consolidates, India is expanding. Its manufacturing push is no longer just rhetoric. Production linked incentive (PLI) schemes have drawn global electronics and pharma players, with exports of high value goods climbing. A new components programme aims to deepen local supply chains, signaling that Delhi wants more than assembly work.
The numbers do tell an upbeat story. Manufacturing output grew 4.3% in FY 2024–25, up from 1.4% a year earlier. Manufacturing FDI rose 18% to US $19 billion, while total FDI reached a record US $81 billion. Exports climbed 5% in April–August 2025 to US $346 billion, with electronics exports up over 40%. Smartphone exports alone topped US $12 billion in five months, a 55% jump from last year. The momentum is real and visible.
While the trajectory is clear, the terrain remains uneven. Infrastructure gaps and state level variation will hinder market expansion, particularly when moving between states.
Simultaneously, India’s relationship with Washington continues to evolve. A trade deal between India and U.S. remains elusive, leaving many exports facing tariffs of up to 50%, a response to India’s imports of Russian oil and other strategic differences. Yet the two sides have just signed a 10-year defense cooperation framework in Kuala Lumpur to deepen joint exercises, technology transfer, and co-production. What is evident is that Delhi’s balancing act remains delicate: it seeks strategic intimacy with Washington as a lever to protect its economic interdependence.
India–China at 75: the cultural and diplomatic undercurrent
Amid shifting geopolitics, India and China continue to rebalance ties through competition, trade gaps, border frictions, and cultural diplomacy. In January 2025, both sides marked 75 years of diplomatic relations, agreeing to “redouble public diplomacy efforts to restore mutual trust and confidence.” President Xi Jinping called it the “right choice” for the two nations to be “partners of mutual achievement” in a “Dragon-Elephant Tango.” While major signals of thaw are awaited, softer exchanges – students, films, Buddhism, tourism – quietly persist, keeping channels open when politics hardens.
The new intergovernmental jigsaw
For Western players, Busan should serve as a reminder that the old binaries — “friend or foe,” “factory or market” — no longer apply. The new lens requires embracing dual engagement: treating China and India not as mirror images but as complementary poles in a reshaped Asian order.
In parallel to the domestic layer, major trade and investment decisions must also account for the shifting trade blocs and intergovernmental fora. Those include BRICS expansion, ASEAN’s renewed integration, APEC’s standards work, and security-driven groupings like the Quad. Alongside these fora, we now have the new ‘G2’ dynamics between Washington and Beijing potentially setting the tone for tariffs and export controls, while the G8 and G20 seek to shape macro coordination and crisis response. These layers overlap rather than align, creating a world of competing norms and episodic shocks.
Asia’s strategic balancing act is not just between countries, but within companies deciding how much to pivot toward India while still engaging China, how to hedge against fragmentation, and regulatory divergence. The lesson of China’s managed openness and India’s managed ambition is the same: neither market can be entered with old assumptions. Both demand patience, partnerships and political fluency as much as capital.
The triangular frame: the new Asian equation
The future of global trade will be decided not in Washington or Beijing alone, but across a triangular web linking China, India, and the rest of emerging Asia — from Vietnam and Indonesia to Bangladesh. This region is becoming the world’s manufacturing and consumption basin. To navigate it, companies will need multi-speed strategies: aligning with China’s policy-driven industries, scaling in India’s expanding market, and leveraging Southeast Asia’s agility. Winners will build supply chains resilient enough to flex across this triangle rather than bet on one corner of it.
The calm before the next shock
The Busan meeting and India’s defense deal with the U.S. offer respite but no real resolution to the underlying issues. For global firms, the right strategy is not choosing sides but building supply and production networks that are resilient enough to absorb shocks. The next one is inevitable; only its timing is uncertain.