the enemies who trade
Why some rivals do business, others don't, and what that means when tensions rise
Taiwan exported $100 billion worth of goods to China last year. A country that surrounds it with warships, flies fighter jets across its airspace, and refuses to recognize its political existence is also its top trading partner.
The 21st century is full of these relationships: governments that don’t speak to each other conducting billions in trade. Military flashpoints with stable supply chains. Border skirmishes on one end of a country and purchase orders on the other.
This interdependence is calculated, uncomfortable, and often mutual.
Let’s consider how and why these arrangements persist. Why China still buys from Taiwan. Why India still buys from China. And why India and Pakistan, despite their proximity and shared history, have kept trade at arm’s length.
Some of these relationships appear stable. Some are deteriorating. But all of them offer insight into a larger question: what actually deters conflict between adversaries? Is it diplomacy, deterrence, or something more transactional?
Let’s start where the stakes are highest.
Economic Logic at Gunpoint
On paper, the relationship is binary. Beijing sees Taiwan as part of its territory. Taiwan operates as a self-governed democracy. Military tensions are constant. Every few months, another round of Chinese drills encircles the island. Every few years, a Taiwanese official visits Washington. The script is familiar.
Yet beneath the political theater, the commercial ties remain intact.
In 2024, total trade between China and Taiwan reached $230.8 billion. Roughly a third of Taiwan’s exports go to China. The most valuable category by far: semiconductors.
Taiwanese firms like TSMC manufacture the chips that power everything from Chinese smartphones to global data centers. Taiwanese companies have also invested more than $200 billion in the mainland over the past two decades. About 177,000 Taiwanese work in Mainland China today.
It’s not a marginal connection. It’s central to both economies. Beijing’s tech ambitions rely heavily on access to Taiwanese components. Taiwan’s manufacturing sector, in turn, is tied to demand from the mainland.
This kind of dependence has a name in the literature: adversarial interdependence. The idea is that economic ties raise the cost of conflict. Some call it a “silicon shield”—a reference to the theory that China would avoid attacking Taiwan because doing so would disrupt its own access to advanced chips.
But there’s no guarantee that logic holds. If Beijing concludes that its long-term technological autonomy requires eliminating Taiwan’s control over chipmaking, the calculation may flip.
In the meantime, the trade continues. Each side treats the relationship as useful, even as they treat the political problem as unsolved. The arrangement is stable only insofar as it remains more beneficial than risky.
Strategic Competition, Economic Attachment
If China–Taiwan is the most volatile commercial relationship on Earth, the U.S.–China relationship is the most complex.
The two countries are openly competing across nearly every strategic domain: artificial intelligence, defense, manufacturing, influence in Asia, global infrastructure, access to critical minerals. And yet in 2024, they still conducted $582.4 billion in bilateral trade.
The United States imported $439 billion in goods from China, primarily consumer electronics, machinery, and household goods. It exported $144 billion, mostly soybeans, aerospace, and semiconductors.
This pattern has persisted through tariffs, export controls, sanctions, and rhetorical hostility. Politicians talk about decoupling, but in practice, the relationship is being managed through carve-outs, not separation.
Apple continues to manufacture in China. Tesla operates a major production hub in Shanghai. Starbucks and Nike depend on Chinese consumers. Meanwhile, Chinese firms still rely on U.S.-designed chips, despite growing domestic substitution efforts.
What’s emerged is not interdependence in the cooperative sense, but something closer to compartmentalized friction. National security and high-end tech are increasingly walled off. Most other categories—consumer goods, industrial components, agriculture—remain exposed to market logic.
The risk is that these compartments don’t hold. Strategic tensions tend to bleed into commercial relationships over time, especially when supply chains are politicized. The shift away from naïve globalization is already underway, and both countries are preparing for a future in which trade is more constrained and trust is harder to manufacture.
But for now, the relationship endures because the alternative is more disruptive than either side is prepared to accept.
Hostility in Public, Dependency in Practice
In June 2020, Indian and Chinese troops clashed in the Galwan Valley, literally beating each other with clubs and rocks. Soldiers were killed on both sides. Diplomatic ties froze. India banned dozens of Chinese mobile apps, citing national security. It seemed like a turning point.
It wasn’t.
By 2022, bilateral trade between India and China had reached a record high of $136.2 billion. China is now India’s largest trading partner. The Indian government continues to signal strategic distance, but the country’s industrial economy tells a different story.
India imports over $100 billion in goods from China. Its exports to China are less than $20 billion. The imbalance is structural. China supplies India with the components that power its manufacturing ecosystem: electronics, solar panels, active pharmaceutical ingredients, heavy machinery.
Indian efforts to diversify—under the banner of Atmanirbhar Bharat or “self-reliant India”—have been politically useful and economically necessary. But progress is slow. Building domestic capacity in core sectors takes time, capital, and policy alignment. In the meantime, the reliance on Chinese inputs continues.
This is a relationship defined by discomfort, not collaboration. There is no real political engagement. Strategic trust is near zero. But the economic exchange persists because neither side has found a cost-effective alternative.
The result is a kind of managed vulnerability. Indian policymakers talk about de-risking. Chinese suppliers keep shipping. The contradiction is accepted, because the alternatives would be more disruptive, at least for now.
No Trade, No Stake
Unlike the other cases, India and Pakistan don’t trade. Not in any meaningful way.
In 2024, total recorded bilateral trade was under $500 million. Pakistan’s exports to India were worth less than $1 million. The economic relationship is so limited that even its absence barely registers in the region’s GDP.
The reasons are not economic. They’re political, historical, and rooted in identity.
In 2019, after India revoked the special status of Jammu and Kashmir, Pakistan suspended trade and downgraded diplomatic ties. But even before that, trade was minimal. The two countries never developed the kind of supply chain interdependencies that create commercial interest in stability.
This absence comes at a cost. Pakistan loses access to the region’s largest market. Indian exporters lose a potential customer base of 220 million people. And both countries forgo the possibility of building a stabilizing layer of shared economic interest.
It’s also a strategic vulnerability. When rivals trade, they build constituencies—companies, industries, sectors—that prefer continuity over escalation. Those don’t exist here. Hardly anyone in either country is lobbying for moderation. There are no incentives to de-escalate, only political reasons to hold the line.
The result is a rivalry that is ideologically clean and economically empty. There’s no interdependence to weaponize. But there’s also no buffer to slow things down when tensions spike.
For both countries, that clarity comes with risk.
What Adversarial Trade Really Tells Us
These relationships fall into three categories.
Strategic adversaries who are economically intertwined. (China–Taiwan, U.S.–China, India–China.)
Strategic adversaries who have almost no commercial relationship. (India–Pakistan.)
Everything else sits somewhere between.
In the first group, the logic is pragmatic. Trade continues not because trust exists, but because each side calculates that the short-term benefits outweigh the long-term risks. These are not alliances. They’re transactions, repeated at scale and stabilized by inertia.
Interdependence doesn’t solve political problems. It doesn’t end territorial disputes or ideological conflicts. What it does is buy time. It raises the cost of escalation. It creates complexity.
Sometimes, that complexity is a constraint. Sometimes, it’s a liability. Either way, it forces decisions to be made with more information and more variables. In a world where fast conflict is always a risk, slow decisions have value.
Where interdependence doesn’t exist—India and Pakistan being the clearest case—none of those friction points are present. There’s no economic stake in restraint. No constituency that benefits from stability. The rivalry can escalate without meaningful internal resistance.
This isn’t a call for blind globalization and the lesson isn’t that trade prevents war. It doesn’t. Russia ran a trade surplus with Ukraine but decided to invade it anyway.
But trade can delay conflict. And delay, in some contexts, is a form of control.
Stability, Contingent
Trade between rivals isn’t peace. It’s management. It’s a form of hedging. It allows governments to postpone hard choices. It creates space to maneuver. And it can—if both sides need it enough—help avoid a crisis.
But it’s not a guarantee. The moment one party believes the future value of trade has collapsed, or can be replaced, the stabilizing effect disappears. That’s when leverage turns into exposure.
Which is why the most important question for any strategic relationship isn’t “Do we trust them?”
It’s: “What do they stand to lose if this stops?”
If the answer is nothing, the risks are higher than they appear.
If you’re thinking about how business opportunity, economic narrative and geopolitical risk intersect, and want to explore this further—I’d welcome a conversation.
You can reach me directly via email. I always learn more from exchange than from certainty.
Adil Husain has over two decades of experience advising Fortune 1000 firms on strategy, market intelligence and global expansion. Having lived and worked in the U.S., and China for a decade each, he brings a unique perspective on how U.S. businesses can best succeed both domestically and internationally. Adil is the Managing Director of Emerging Strategy, a global strategic intelligence firm that helps enterprises navigate complex markets.
You can contact Adil here, subscribe to this newsletter, or connect with him on LinkedIn.
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