What India needs to learn from US-China trade tussle

Hindustan Times

2 days ago

In the 1960s, British prime minister Harold Wilson quipped that a week was a long time in politics, but in the age of Donald Trump even days matter. The escalating trade war between the US and China suddenly took a turn after both sides agreed to a 90-day truce in mid-May during negotiations in Geneva, reducing tariffs temporarily. In turn, China had agreed to scrap non-tariff countermeasures that it had put in place with respect to curbs on export of critical minerals. The dialling down of tensions had led to jubilation on both sides creating an impression that their ties were on the mend. But, President Trump on May 31 again accused China of breaching the Geneva concord to roll back tariffs and restrictions on critical minerals.
The Washington-Beijing armistice remains shaky. China's use of export control to constrict the flow of key components in industries that have the potential for mass employment is causing alarm worldwide. Industry groups in the US have complained about slow issuance of licenses by Chinese authorities for export of rare-earth elements. The New York Times reported that Ford Motor temporarily shut a Chicago factory that manufactures sport utility vehicles after a supplier ran out of the magnets. The magnets are used in automobiles to operate steering systems, brakes, and fuel injectors. Nearer home, Bajaj Auto, has warned that if rare-earth magnet shipments do not arrive from China, then the automobile sector could be affected. The European Union Chamber of Commerce in China has underscored that the tardy pace of approvals by China for rare-earth exports is affecting production schedules at factories.
On the other hand, Beijing accuses Washington of violating the spirit to the Geneva truce by issuing guidelines that seek to restrict the usage specifically of Artificial Intelligence (AI) chips manufactured by Chinese tech giant Huawei. Beijing's grouse is that a Chinese company has been singled out in an official US government document. The US government has maintained that its guideline highlights the risks associated with using products developed by China in violation of export controls. Consequently, the US authorities have also spelled out the threat of imprisonment, penalties, and loss of export privileges for the violators. Thus, the Trump administration's new diktat presents a dilemma for international technology firms, pushing them to pick a side when it comes to hardware, which will further exacerbate the divide between the world's two largest economies.
The Trump administration has now opened a new front — campus enrolment — promising to revoke the visas of Chinese students with ties to the Communist Party of China. The spotlight is on students pursuing courses related to science, technology, engineering, and mathematics (STEM). Secretary of State Marco Rubio has announced that decks are being prepared to change rules related to study visas with an aim to improve scrutiny of applications from China and Hong Kong.
While the US-China trade talks have stalled for now, it would be too soon to pronounce a verdict on the trade row. US treasury secretary Scott Bessent has indicated that high-level parleys between President Trump and President Xi Jinping may help in smoothening rough edges. These developments have underlined the primacy of technology and supply chains in the great-power competition. Trump 1.0's National Security Strategy in 2017 credited the US innovation system for China's economic rise and military upgradation, restricting the access of Huawei to semiconductor technology. The Joe Biden administration stressed upon the need for the US to maintain a preponderant edge over rivals in the sphere of technological development.
In turn, Beijing has created an export control framework, weaponising the flow of critical elements to settle geopolitical scores. It has toyed with this toolkit as early as 2010 when it cut off supplies of rare earths to Japan over a fishing dispute.
Earlier reports surfaced that exports related to dual-use technology from China by tech companies were subject to stringent customs inspections that had delayed deliveries of production equipment and material to India. India's economic dependency on China has increased with imports climbing to a record high of $113.45 billion in 2024-25. New Delhi must build capabilities and innovation to combat Beijing's supply chain warfare.
Harsh V Pant is vice president, Studies and Foreign Policy, and Kalpit A Mankikar is fellow, China Studies, Observer Research Foundation, New Delhi. The views expressed are personal.
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