Opinion India needs a strategy to deal with China’s restrictions on exports of rare earths

On April 2, US President Donald Trump unveiled his policy of reciprocal tariffs, targeting most of America’s trading partners. Two days later, on April 4, China responded by announcing a 34 per cent tariff on all US imports, while also placing export restrictions on rare earths. Critical minerals and rare earth elements, which are used across several key sectors, ranging from electronics to renewables, automobiles and defence, are increasingly playing a vital role in the economy. For instance, lithium, nickel and cobalt are used in lithium-ion batteries. Dysprosium and neodymium, and tellurium, indium, and gallium are used in wind turbines and photovoltaic cells respectively. These minerals are central to the fourth industrial revolution. Restrictions over their supply, which can disrupt production processes across several sectors, have thus become central to the global trade war.

China holds a position of dominance. As per the International Energy Agency, the country accounts for a 35 per cent share in the refining of nickel, 50-70 per cent of lithium and cobalt and around 90 per cent for rare earth elements. China not only dominates the production of rare earths, but also has the most reserves. As per data from the US Geological Survey, the country’s reserves have been estimated at 44 million metric tons. Brazil’s reserves have been pegged at 21 million metric tons, India’s at 6.9 million, Australia’s at 5.7, Russia’s at 3.8 million and Vietnam’s at 3.5 million. Following the imposition of restrictions in April, China’s exports of rare earth magnets fell sharply in May. The restrictions have led to panic across the world, with many staring at supply shortages in several sectors.

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In India, for instance, auto majors have been vocal about their worries over supply being squeezed. As per reports, the domestic auto industry has asked the government to intervene in the matter. Other countries are also moving ahead to secure supplies. The framework agreed to by the US and China also involves the easing of rare earth supplies. Announcing the deal, Trump posted on a social media platform that “Full magnets, and any necessary rare earths, will be supplied, up front, by China.” As per reports, EU leaders will also be pushing for supplies from China at a summit next month. Other countries such as Brazil, Saudi Arabia and Vietnam are said to be aggressively exploring this segment. In 2025, India launched a National Critical Mineral Mission to help achieve self-reliance in the critical mineral sector. Under this, the Geological Survey of India is expected to conduct 1,200 exploration projects by 2030-31. This issue needs to be tackled at multiple levels. The objective should be to secure supplies in the short term so as to prevent disruptions across industries, while also focusing on expanding domestic exploration, mining and processing and firming up alternative sources of supply.