'If Trump cuts a deal with China...': Ruchir Sharma warns India against isolating itself
Ruchir Sharma pointed to signs that China may now be recalibrating its internal and external posture.
- Apr 20, 2025,
- Updated Apr 20, 2025 11:27 AM IST
Ruchir Sharma, economist and chairman of Rockefeller International, believes that distrust between India and China has to soften a bit amid trade tension caused by the US. "One thing which I think India has to do also is this distrust with China has to ease a bit," Sharma said in an exclusive interview with Business Today Executive Director Rahul Kanwal.
Acknowledging the confusion over China's border aggression, he added, "I think that China's actions on what they did (at the border) were totally irrational, it's something which baffled us also that what is China doing out here after the kind of effort Modi had put in to cultivate Xi Jinping."
However, Sharma pointed to signs that China may now be recalibrating its internal and external posture. "You have to understand that China is also under pressure just now to change. Xi Jinping has been on a tour of all of Southeast Asia. So I think that China's attitude is also changing under pressure."
Asked whether Modi can trust Xi Jinping and whether India is becoming more comfortable in the US-led "Trump ecosystem,” Sharma said, "That may be okay. India's been sending much more mixed signals. Compared to like a year ago, it seems to me some of the tensions have eased."
He warned that Trump's unpredictability could reshape alliances quickly. "Trump is a dealmaker. Tomorrow if by any chance he cuts a deal with China — and with him you can't rule these things out — then we'll be left like feeling a bit more isolated."
Earlier this week, US President Donald Trump sounded confident in reaching a "very good" trade deal with China, despite the US imposing steep tariffs of up to 245 per cent on Chinese imports in response to Beijing's retaliatory actions. "We're going to make a deal. I think we're going to make a very good deal with China," Trump said, as reported by The Hill.
The economist said that if China was beginning to change its attitude, New Delhi should respond to it. "We have to trust and verify what is China doing out there. If China is beginning to change its attitude I think we should respond to it. And this is coming from someone who's been a longtime China bear and like suspicious of China on many fronts. But I'm seeing a change in China too."
He elaborated that Xi Jinping is being forced to change under domestic and international pressures. "He's reaching out now much more to the private sector. This year, he's been meeting the private sector people a lot in public, sending a message that the government's out here to back you.”
Externally too, Sharma said China's military stance may be softening. "The PLA had been very adventurous overseas not just with India but in the South China Sea and other places. They are showing some signs of toning that down because they're under real attack from the US."
The economist advised India not to fall into rigid thinking. "We have to look out for ourselves and we should not have these blind spots — we're just not going to speak to anyone out there because the environment has changed. But net-net I feel that for countries like India, this could be a good moment. So I see more good of this coming for India than bad in fact."
On China's economic future, Sharma said much will depend on how the country adjusts its model. "One of the big problems in China has been that its model, especially for such a large economy, has been far too export-dependent. So does it use this opportunity now to finally make its economy much more domestic- oriented?"
Looking ahead, Sharma believes the US and China will be net losers in the global trade war, while countries like India and Brazil could emerge stronger. "The old saying is that when two elephants fight in the jungle everybody gets trampled. Here, I feel a bit of the opposite is going to happen. The big losers are going to be the US and China on a net basis in the next few years and the winners could be countries like India, Brazil, and some of the European places where the domestic economy is large enough and yet trade plays some role but not an oversized role."
He added that American companies may face long-term pain. "One of the single biggest losers of this trade war is going to be American companies. Regardless of what happens, I think that the calculation is not going to be pure about efficiency anymore...That's going to hurt the profitability of American companies."
Cautioning against relying too heavily on American capital, Sharma said, "For India to rely too much on American capital to come here, especially in terms of foreign direct investment from America from these companies, I think that scope's limited."
He concluded by pointing to the role other countries could play—if India gets its act together. “Where things can increase a lot is that other European, Japanese—these are the companies—they are going to still be looking to diversify and to go out. What keeps foreigners out of India often is that the domestic regulatory environment and the domestic ecosystem is so complicated. That's what is the real [problem].”
Ruchir Sharma, economist and chairman of Rockefeller International, believes that distrust between India and China has to soften a bit amid trade tension caused by the US. "One thing which I think India has to do also is this distrust with China has to ease a bit," Sharma said in an exclusive interview with Business Today Executive Director Rahul Kanwal.
Acknowledging the confusion over China's border aggression, he added, "I think that China's actions on what they did (at the border) were totally irrational, it's something which baffled us also that what is China doing out here after the kind of effort Modi had put in to cultivate Xi Jinping."
However, Sharma pointed to signs that China may now be recalibrating its internal and external posture. "You have to understand that China is also under pressure just now to change. Xi Jinping has been on a tour of all of Southeast Asia. So I think that China's attitude is also changing under pressure."
Asked whether Modi can trust Xi Jinping and whether India is becoming more comfortable in the US-led "Trump ecosystem,” Sharma said, "That may be okay. India's been sending much more mixed signals. Compared to like a year ago, it seems to me some of the tensions have eased."
He warned that Trump's unpredictability could reshape alliances quickly. "Trump is a dealmaker. Tomorrow if by any chance he cuts a deal with China — and with him you can't rule these things out — then we'll be left like feeling a bit more isolated."
Earlier this week, US President Donald Trump sounded confident in reaching a "very good" trade deal with China, despite the US imposing steep tariffs of up to 245 per cent on Chinese imports in response to Beijing's retaliatory actions. "We're going to make a deal. I think we're going to make a very good deal with China," Trump said, as reported by The Hill.
The economist said that if China was beginning to change its attitude, New Delhi should respond to it. "We have to trust and verify what is China doing out there. If China is beginning to change its attitude I think we should respond to it. And this is coming from someone who's been a longtime China bear and like suspicious of China on many fronts. But I'm seeing a change in China too."
He elaborated that Xi Jinping is being forced to change under domestic and international pressures. "He's reaching out now much more to the private sector. This year, he's been meeting the private sector people a lot in public, sending a message that the government's out here to back you.”
Externally too, Sharma said China's military stance may be softening. "The PLA had been very adventurous overseas not just with India but in the South China Sea and other places. They are showing some signs of toning that down because they're under real attack from the US."
The economist advised India not to fall into rigid thinking. "We have to look out for ourselves and we should not have these blind spots — we're just not going to speak to anyone out there because the environment has changed. But net-net I feel that for countries like India, this could be a good moment. So I see more good of this coming for India than bad in fact."
On China's economic future, Sharma said much will depend on how the country adjusts its model. "One of the big problems in China has been that its model, especially for such a large economy, has been far too export-dependent. So does it use this opportunity now to finally make its economy much more domestic- oriented?"
Looking ahead, Sharma believes the US and China will be net losers in the global trade war, while countries like India and Brazil could emerge stronger. "The old saying is that when two elephants fight in the jungle everybody gets trampled. Here, I feel a bit of the opposite is going to happen. The big losers are going to be the US and China on a net basis in the next few years and the winners could be countries like India, Brazil, and some of the European places where the domestic economy is large enough and yet trade plays some role but not an oversized role."
He added that American companies may face long-term pain. "One of the single biggest losers of this trade war is going to be American companies. Regardless of what happens, I think that the calculation is not going to be pure about efficiency anymore...That's going to hurt the profitability of American companies."
Cautioning against relying too heavily on American capital, Sharma said, "For India to rely too much on American capital to come here, especially in terms of foreign direct investment from America from these companies, I think that scope's limited."
He concluded by pointing to the role other countries could play—if India gets its act together. “Where things can increase a lot is that other European, Japanese—these are the companies—they are going to still be looking to diversify and to go out. What keeps foreigners out of India often is that the domestic regulatory environment and the domestic ecosystem is so complicated. That's what is the real [problem].”