India-China trade ties shift amid US tariffs
India (Commonwealth Union)_ The current tariff war between the United States, India, and China may surprisingly bring the two Asian powers closer together in terms of economic cooperation. With US President Donald Trump proposing a hefty 250% tax on imported drugs, including those from India, both New Delhi and Beijing are reconsidering how they may work together to lessen reliance on the US market. In response, India and China are preparing to open discussions on a broader trade arrangement.
This includes the prospective restoration of the supply of rare earth magnets, fertilizers, and important medicinal chemicals from China to India, which has been significantly disrupted in the last year. While early outreach has begun, the flow of these critical goods has not yet resumed. However, industry insiders say that both nations recognize the risks posed by continued reliance on US markets, especially in pharmaceuticals. As a result, there is growing pressure within India’s industry to quickly rebuild supply lines from China.
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Talks on the horizon
Leaders and trade representatives from India and China are expected to meet later this month, aligning with Indian Prime Minister Narendra Modi’s anticipated visit to Tianjin for the Shanghai Cooperation Organisation (SCO) summit, set for August 31 to September 1. A senior official close to the matter confirmed that the top priorities on the agenda are rare earth magnets, fertilizers, and pharmaceuticals. Ahead of the summit, India’s commerce ministry will also hold meetings with representatives from the pharmaceutical sector to gather input and develop a strategy for strengthening cooperation with China.
The talks are being framed not just as economic negotiations but as part of a larger diplomatic effort to stabilize ties between the two countries following several years of tension. India’s foreign investment rules, particularly those affecting countries that share a border with it, remain a sensitive issue, but discussions appear to be progressing with cautious optimism.
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Wang Yi visited India after three years
In a key development, China’s Foreign Minister Wang Yi made a two-day visit to India on August 18, marking his first trip since border clashes disrupted relations in 2020. During his visit, he personally handed over the SCO summit invitation to Prime Minister Modi. Wang also met with Ajit Doval, India’s National Security Advisor, and the conversation switched from trade to regional peace and security. He admitted that the weak ties of recent years were detrimental to both countries and expressed optimism for a more stable future. NSA Doval responded by noting that recent developments have helped stabilize the border and improve diplomatic dialogue. He said he was confident that the upcoming summit and continued discussions would build on that progress.
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Supply agreements restarted
One of the biggest outcomes of Wang Yi’s visit was the confirmation that China will resume exports of rare earth materials, fertilizers, and tunnel-boring machines to India. Political tensions and new Chinese regulations had restricted these items in previous months. Wang stated that global dynamics are changing quickly, and both India and China, as major developing nations with a combined population of nearly three billion, must show leadership by cooperating with one another. He emphasized the importance of free trade and a stable international system. Chinese exports of these items are crucial to India. Around 30% of India’s fertilizers, many rare earth materials used in electronics and electric vehicles, and most tunnel-boring machines used in urban infrastructure projects are sourced from China. Various sectors have experienced delays due to the sudden halt in supplies over the last year.
Meeting with S. Jaishankar
During his stay, Wang Yi also held talks with India’s External Affairs Minister, S. Jaishankar. The conversations were deemed positive, with both ministers expressing a wish to move past previous differences and restore essential supply lines. Jaishankar is claimed to have raised concern over ongoing fertilizer shortages of urea, DAP, and NPK, as well as rare earth minerals and TBMs. Wang reacted by assuring India that China intends to resume these exports in a timely way. Interestingly, while trade was at the forefront of these conversations, Jaishankar did not bring up the delicate topic of border tensions during this round of diplomacy, suggesting a potential gap in emphasis between economic and security concerns.
Why did supplies stop?
India’s reliance on Chinese imports has always been substantial, but relations took a hit after the 2020 border standoff in eastern Ladakh. Following that, China increasingly tightened export controls, citing national security and end-use concerns. In April 2025, China implemented new export regulations for rare earth elements, requiring international buyers to show end-user certifications confirming non-military and non-US usage.
This action occurred as Washington tightened trade restrictions, notably on Chinese technology and defense industries. Additionally, fertilizer exports to India, including urea and specialist compounds such as calcium nitrate and monoammonium phosphate, were also impacted. China once accounted for 80% of India’s fertilizer imports in these categories. China paused these shipments over the past three months, straining India’s agriculture sector. But Beijing has now begun easing those restrictions as talks progress.
Could this be a significant turning point for Asia?
As the United States raises tariffs and trade barriers, India and China may move closer together for economical benefits. Although severe concerns persist, notably along their shared border, the latest round of discussions suggests a shift toward pragmatic partnership, at least in economic terms. China has demonstrated its commitment by initiating the shipment of essential commodities like fertilizers, rare earths, and infrastructure equipment. Meanwhile, India is eager to strengthen ties with its neighbor while pursuing its strategic and security goals. The upcoming SCO conference in Tianjin might send the next big signal about how this growing relationship would affect the region’s economic future.
