Trump, Xi agree on ceasefire in trade war: China eases curbs on rare earth exports

“I was extremely honored by the fact that President Xi authorized China to begin the purchase of massive amounts of Soybeans, Sorghum, and other Farm products… Additionally, China has agreed to continue the flow of Rare Earth, Critical Minerals, Magnets, etc., openly and freely. Very significantly, China has strongly stated that they will work diligently with us to stop the flow of Fentanyl into our Country,” Trump said in a post on Truth Social.

However, deeper distrust between the two countries was evident, as the deal will be up for renegotiation every year, and no resolution was announced on multiple areas, such as Section 301 and 232-related tariffs, or tit-for-tat port fees on American and Chinese ships. Before the Trump-Xi meeting, the US had even launched a Section 301 investigation to look into China’s compliance with the agreement struck between the two countries during the first Trump term in White House.

The new tariff dynamics between the US and China now leave India facing the steepest tariffs (50 per cent) on any country globally, and a greater incentive for businesses to invest or reroute products via other countries. To counter the prevailing tariff dynamics, experts said, India should be pushing for 15 per cent tariffs under a trade deal with the US, to gain a substantial edge over China as well as the Association of Southeast Asian Nations (ASEAN).

New dynamics for India amid US-China truce

With the US and China dialling down tensions, the focus shifts firmly to India, which Washington has long seen as a counterweight to Beijing’s influence in the region. Trade experts said India needs to target a 15 per cent tariff concession in line with what the UK and Japan have received, as Indian products may not be competitive compared to Chinese goods, even with a 20 per cent difference in tariffs with the neighbour.

The 15 per cent tariff rate would also be ideal for India because the US has kept tariffs at 20 per cent on Vietnam and 19 per cent on ASEAN countries such as Malaysia and Cambodia. ASEAN and India are the two regions seen as part of the “China plus one” strategy for global companies. A lower rate compared to Vietnam is especially crucial for India, as Vietnam is rapidly boosting goods exports and, at its current growth rate, could surpass India’s total goods exports despite being a much smaller country.

“If India can sign a deal with the US securing 15 per cent and protecting sensitive areas via a quota, then we have nothing to lose, as the US is not a manufacturing hub. Even a duty cut on, say, Harley-Davidson bikes to 0 per cent is not going to hurt India at the price point at which the US sells its items,” said Arpita Mukherjee, Professor at the Indian Council for Research on International Economic Relations (ICRIER).

Mukherjee said India’s deal with the US may not end uncertainty, as seen in other trade agreements that the US is signing, and that the best roadmap for New Delhi is to follow what the UK, EU and Japan have done. “India stands to gain when the US begins discussing services, IT and digital trade. We gain when we can negotiate H1B visas in return for tariff concessions,” Mukherjee said.

China’s exports to US stable despite tariffs, not India’s

China may have an upper hand in the trade tussle with the US, as its exports are now less reliant on the American market compared to earlier. While 20 per cent of India’s total goods are shipped to the US, for China the comparable number is 12 per cent. Post imposition of reciprocal tariffs by the US, data shows India’s exports to the US have registered a decline, while Chinese exports have grown.

Think tank Global Trade Research Initiative (GTRI) pointed out that China’s exports to the US rose from $28.8 billion in May 2025 to $34.3 billion in September 2025. By contrast, India’s exports to the US plunged 37 per cent during the same period — from $8.8 billion to $5.5 billion — as other Asian suppliers with lower tariff exposure captured market share.

Ajay Srivastava, head of GTRI, said the US-China agreement reflects Washington’s mounting concern over vulnerabilities in semiconductor and electronics production. “Rare-earth minerals are essential to chipmaking and clean-energy technologies, areas where Chinese dominance leaves the US exposed. Beijing, however, understands that America’s dependence extends far beyond rare earths — to green-energy inputs, pharmaceutical ingredients (APIs), and mass-market consumer goods — giving China multiple levers of influence even after tariff cuts,” Srivastava said.

Trinh Nguyen, a senior economist covering emerging Asia at Natixis, based in Hong Kong, said in a social media post that a template seems to be appearing for Trump’s tariffs. “Super allies that have trade surpluses get a 15 per cent ceiling on tariffs in exchange for investing in the US and promoting US interests in the global sphere. ‘Somewhat’ allies with trade surpluses get 19 per cent to 20 per cent and with some clauses to ensure compliance (rerouting) & also investment and purchase pledges, in this case planes and defence, etc,” she said.

“Where does that leave India? Well, I think the 25 per cent Russian oil tariff can go. That leaves us with 25 per cent to work with. As it stands today, China has a lower tariff (47 per cent if we include Trump 1.0) rate than India,” Nguyen said.

‘Russia did not come up for discussion’

While Russian oil has been a point of contention for the US in its trade negotiations with India, it has not been an issue in US-China talks. The US imposed an additional 25 per cent tariff on India for the purchase of Russian oil, which complicated the trade negotiations with India that started in February.

“He [Xi] has been buying oil from Russia for a long time. It takes care of a big part of China. I can say that India has been doing very good on that front, but we did not discuss the oil issue. We discussed working together to see if we can get the [Ukraine] war finished,” Trump told reporters aboard Air Force One.

In his post of Truth Social, Trump said: “China also agreed that they will begin the process of purchasing American Energy. In fact, a very large scale transaction may take place concerning the purchase of Oil and Gas from the Great State of Alaska. Chris Wright, Doug Burgum, and our respective Energy teams will be meeting to see if such an Energy Deal can be worked out.”

US-China piecemeal agreement and its flaws

While the US-China agreement on Thursday hints at a pause in the trade war, US agreements with the ASEAN region indicate that Washington is taking concrete steps to move more and more countries away from Chinese influence. The US struck a trade deal with Malaysia and Cambodia during the ASEAN summit.

Simon J. Evenett, Professor of Geopolitics and Strategy at IMD, in his note on recent US trade deals in the ASEAN region, said: “The security provisions in these agreements will be of concern to the People’s Republic of China. Article 5.1(1) of both agreements calls for Cambodia and Malaysia to align with measures taken by the United States against third parties. Let us not forget that since May 2024, Canada and Mexico have raised their import tariffs on Chinese electric vehicles at the behest of the United States — this is what alignment means in practice.”

Evenett further said that Article 5.1(2) of both agreements calls upon Cambodia and Malaysia to adopt and implement measures against actions taken by third parties which are said to harm the United States.

“This commitment relates only to actions taken by third parties and their related entities in Cambodia and Malaysia. Given the extent of Chinese investment in these ASEAN economies, these developments will also be viewed negatively in Beijing. The agreements with Cambodia and Malaysia commit them to adopt measures with restrictive effects relating to shipbuilding and shipping of goods. This could include instituting port charges on Chinese-owned, -operated and -built ships, similar to what the United States has implemented this month,” he said.