Asia Communique

Crosscurrents in India–China Relations | China Slaps 75% Tariff on Canadian Canola | US–China Trade Truce Delays Tensions |

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Flights, Fertilizer, and the Fight for Himalayan Rivers

India and China appear to be edging toward a cautious thaw after years of diplomatic chill, with three developments this month hinting at a recalibration of ties.

Direct Flights Poised for Takeoff

Officials in both countries are moving toward resuming direct passenger flights as soon as September, potentially announcing the decision during the Shanghai Cooperation Organization summit in Tianjin at the end of August. Airlines in India have been told to prepare routes to China at short notice, reversing a suspension that has been in place since the pandemic. Before the halt, carriers such as Air India, IndiGo, Air China, China Southern, and China Eastern linked major cities in both countries. The revival of air links comes as New Delhi’s relations with Washington face turbulence, following President Donald Trump’s decision to double tariffs on Indian goods in retaliation for its purchases of Russian oil.

A Visa Normalization With Strings Attached

New information suggests the much-touted reopening of India’s tourist visa channel for Chinese citizens comes with an unpublicized barrier. Sources confirm that Chinese tourists are now being asked to show a minimum balance of 100,000 RMB (about $13,920) in their bank accounts — a requirement not imposed on tourists from other countries. The policy undercuts earlier headlines about a return to normalcy in people-to-people exchanges, and could dampen the expected flow of Chinese visitors despite the restoration of air links.

Hydropower in the Disputed Northeast

In a parallel move underscoring the strategic complexity of the relationship, India’s cabinet has approved construction of the 700-megawatt Tato-II hydropower project in Arunachal Pradesh — territory also claimed by China. Costing $929 million and slated for completion in six years, the project sits on the Siyom River, a tributary of the Brahmaputra. It comes just months after Beijing announced plans for the world’s largest hydropower dam on the upper reaches of the Yarlung Tsangpo, in a section of Tibet that flows into Arunachal Pradesh. Indian officials have long warned that China’s mega-dam, in a seismically active zone, could threaten downstream water security.

China Relaxes Urea Export Curbs

Meanwhile, Beijing has lifted its informal ban on urea exports to India, allowing up to 300,000 tons of the key crop nutrient to be shipped. The easing comes after a year of restricted trade and marks another signal of warming ties, even if the quantities are modest. India, the world’s largest urea importer, relies on steady foreign supplies to maintain farm output, and Chinese shipments could help cool prices in tight global markets.

Taken together, the resumption of flights, renewed trade in agricultural inputs, stricter visa requirements, and simultaneous infrastructure build-outs in disputed territory capture the contradictory nature of India–China relations — part cooperation, part confrontation, and wholly strategic. The coming weeks, particularly the SCO summit in Tianjin, may reveal whether this tentative opening is the start of a broader diplomatic reset or simply another brief interlude in a rivalry defined by both competition and necessity.

China Slaps 75% Provisional Tariff on Canadian Canola in Escalating Trade Fight

China has announced a preliminary anti-dumping duty of 75.8% on Canadian canola imports, effective Thursday — a major escalation in a trade dispute that began last August when Ottawa imposed tariffs on Chinese electric vehicles. The move effectively prices Canadian canola out of the Chinese market, which is by far the world’s largest importer of the oilseed.

The Ministry of Commerce said its investigation, launched in September 2024, found Canada’s canola sector had benefited from “substantial” government subsidies and preferential policies. The final ruling is expected by September but could be delayed six months. While the rate could change, analysts say the provisional duty sends a clear political signal: Beijing is willing to leverage agricultural imports in retaliation.

Market reaction was swift, with China’s most active rapeseed meal futures sliding 3% — the sharpest daily drop since late June. The tariff also undercuts the more conciliatory tone struck just two months ago, when Premier Li Qiang told Canadian Prime Minister Mark Carney that the two sides had “no deep-seated conflicts of interest.”

Impact on Supply and Opportunity for Australia

Canada exported $5 billion worth of canola to China in 2023, making the trade a cornerstone of its agricultural sector. Replacing Canadian supply at scale will be challenging in the short term, especially for China’s aquaculture industry, which relies heavily on canola-based feed.

Australia — the second-largest canola exporter — may seize part of the market as it prepares to send test cargoes after a yearslong ban linked to plant disease. But analysts caution that even with Australian imports, “fully replacing Canadian canola will be very difficult unless import demand drops sharply.”

Broader Agricultural Tensions

The canola measure follows earlier Chinese tariffs on Canadian canola meal and a separate new anti-dumping investigation into Canadian pea starch. Canada, once the dominant pea supplier to China, has already seen its market share overtaken by Russia. Both Ottawa and Washington have in recent years accused Beijing of dumping subsidized pea protein in North America.

With China and the U.S. having recently paused some tariff hikes, the canola move underscores that Beijing’s trade frictions with Ottawa remain on a collision course — and that Canada’s farmers may once again find themselves caught in the middle of geopolitical brinkmanship.

U.S.–China Trade Truce Buys Time, Not Certainty

The United States and China have hit the pause button on their trade war for another 90 days, averting a spike in tariffs that would have pushed duties into triple digits and risked a near-total freeze in bilateral trade.

President Donald Trump announced on Truth Social that he had signed an executive order delaying the planned tariff hikes until November 10, while Beijing issued a parallel suspension of its own retaliatory measures. The extension preserves existing rates — 30% on Chinese goods entering the U.S. and 10% on U.S. goods entering China — instead of the looming 145% and 125% duties that would have amounted to a de facto embargo.

The reprieve is timed with the seasonal surge in U.S. retail imports ahead of the end-of-year holiday shopping rush, covering high-volume categories such as electronics, apparel, and toys. Markets responded with cautious optimism, lifting Asian equities and steadying regional currencies.

The truce, first struck in May and extended after follow-up talks in Stockholm in late July, underscores both sides’ recognition that the spring’s tariff escalation was economically unsustainable. Yet the underlying disputes remain unresolved. Washington continues to press Beijing on trade reciprocity, technology access, and fentanyl flows, while also urging China to curtail purchases of Russian oil. Beijing, for its part, has floated demands for access to more U.S. high-tech exports and resisted politically sensitive concessions.

Recent trade data highlight the shifting landscape: China’s exports to the U.S. plunged 21.7% year-on-year last month, while shipments to Southeast Asia rose 16.6% as manufacturers seek alternative markets. The U.S. trade deficit with China, meanwhile, has fallen to its lowest level in over two decades.

For now, the extension offers breathing space for negotiators — and for retailers stocking shelves ahead of the holidays — but the risk of another escalation looms. Trump has suggested he may meet President Xi Jinping before year’s end if a broader agreement takes shape, setting the stage for a high-stakes autumn in U.S.–China economic diplomacy.

Beijing Urges Caution on Nvidia H20 Chips, Pressuring Shift to Domestic AI Hardware

Beijing has quietly advised local companies to avoid using Nvidia’s H20 processors — particularly in government or national security-related work — complicating the US chipmaker’s attempt to re-enter the Chinese market after President Donald Trump reversed a near-total sales ban. The guidance, delivered in recent weeks via notices to state enterprises and private firms, stops short of an outright prohibition but strongly discourages adoption in sensitive sectors.

The H20, a lower-spec AI accelerator designed specifically to comply with years of US export restrictions, remains popular in China for certain machine learning tasks, especially the inference stage of AI model deployment. Chinese giants such as Alibaba and Tencent have used it as a stopgap while domestic champion Huawei struggles to meet demand. Analysts say that cutting access to H20s could raise the cost of advanced AI operations in China by three to six times — a fact that helps explain Beijing’s selective approach.

National Security Concerns and Industrial Policy Goals

Chinese authorities have reportedly raised security questions about the H20, including unsubstantiated fears of location-tracking or remote-disabling functions — claims Nvidia has flatly denied. The guidance coincides with state media reports casting doubt on the chip’s reliability and follows similar restrictions imposed in past years on Tesla vehicles, Apple iPhones, and Micron memory chips in certain institutions.

At the same time, the policy reflects Beijing’s strategic priority of accelerating domestic semiconductor production and reducing reliance on US suppliers. Industry sources suggest that regulators are using selective discouragement to ensure a guaranteed customer base for Huawei and other local producers, while still permitting H20 imports where domestic chips cannot yet compete.

Market Reaction and Strategic Implications

Shares of Chinese AI chipmaker Cambricon surged 20% on the news, with other domestic semiconductor firms also rallying. The move casts doubt on the Trump administration’s plan to turn resumed Nvidia and AMD chip sales into a revenue stream for the US Treasury — a deal that requires both firms to hand over 15% of China-related revenue.

While some Chinese companies may scale back orders, analysts remain split on whether demand for H20s will drop significantly in the near term. Nvidia’s chips still outperform most local alternatives in versatility and performance, and Beijing’s current guidance is limited to specific applications. But officials could extend the restrictions, especially as domestic production capacity improves.

For now, the episode underscores a paradox in US-China tech relations: Washington wants to keep China dependent on downgraded American chips, while Beijing is trying to minimize that dependence without triggering a sudden shortfall in AI computing power — a delicate balancing act that could tip either way as geopolitical and market pressures mount.

Reads:

America’s Military Runs on Chinese Rare Earths — Foreign Policy

A New Chapter in the U.S.-China Chip Trade — Foreign Policy

First Tango In Five Years — Times of India