Fresh tensions have arisen between the United States and China just as high-stakes trade negotiations are anticipated later this month. Following China’s recent expansion of export controls on rare earth materials and other essential minerals on October 9, the US has issued a stark warning regarding potential tariffs. President Trump announced plans to impose a drastic 100 percent tariff increase on Chinese goods, a move that has resulted in a significant downturn in US stock markets.
The implications of these trade actions are particularly crucial for India, which is currently engaged in negotiations for a trade deal with the US. As China is India’s largest source of imports, the newly implemented curbs on rare earths threaten to destabilize India’s automobile industry. Conversely, the US remains India’s largest destination for exports.
In a bold statement, Trump condemned China’s recent trade stance, describing it as extraordinarily aggressive and hostile. He claimed that China plans to implement extensive export controls on various products, effective November 1, 2025, which would impact countries worldwide. “This affects all countries, without exception, and was obviously a plan devised by them years ago,” he stated. The proposed tariffs will be applicable on top of any current duties being paid by China, along with additional export controls on vital software slated for implementation at the same time.
Ajay Srivastava, a former Indian Trade Service officer, underscored the significance of China’s export control measures, asserting that a wide range of industries— from military equipment to renewable energy—could be adversely affected. China currently holds around 70 percent of the global refining capacity for rare earths, meaning that a ripple effect could increase prices for electric vehicles, wind turbines, and semiconductor components. He noted that while the US seeks to develop its mineral supply chains with partnerships in Australia, Vietnam, and Canada, China may redirect its resources to strengthen ties with its non-Western allies.
Srivastava also warned that escalating trade conflicts could lead to inflationary pressures in the US, complicating economic conditions for consumers and potentially undermining Trump’s broader economic agenda. The shifting landscape reminds India that trade agreements with the US are never guaranteed permanence, implying a need for India to negotiate on equal terms and prioritize its strategic autonomy.
Experts speculate that these aggressive maneuvers might be part of a negotiating strategy ahead of the unlikely Trump-Xi meeting at the APEC Summit. A report from MUFG Research suggests that while China’s export controls are extensive, their practical enforcement remains uncertain. The timing of these measures—set to take effect in the coming months—could be utilized as leverage in upcoming negotiations.
Moreover, the strain in trade relations between the US and China is significant given the current state of the Chinese economy. Weak domestic demand is raising concerns that could undermine global trade reliance on China’s manufacturing capabilities. Reports indicate a growing gap between China’s imports and exports, marking this as the largest trade imbalance globally, emphasizing the unique dominance China has maintained over decades.
Trade experts also highlight that increasing Chinese exports have resulted in a decline in middle-income job opportunities within the US and other Western countries. In India, imports from China have surged dramatically in recent years, highlighting a growing dependence that reached over $100 billion in 2023-24.
As these developments unfold, the intricate dynamics of US-China trade relations will continue to hold significant implications for global markets and economies, including India’s burgeoning industrial landscape.
