US-China Trade Agreement: A Turning Point

The June 2025 trade agreement between the United States and China marked a pivotal moment in their prolonged trade conflict. Despite President Trump’s assertive rhetoric, the deal highlighted China’s strategic advantage. Beijing successfully dictated the negotiation’s pace and terms, securing the removal of key US restrictions while offering minimal concessions. This outcome underscores China’s tactical victory and offers valuable insights for India as it navigates its own trade negotiations with the US.

China’s Rare Earth Strategy

A critical factor in China’s success was its control over rare earth exports, particularly heavy rare earth elements like dysprosium and samarium, essential for US defense systems and advanced electronics. By vertically integrating its rare earth supply chain, China eliminated independent miners and enforced strict export licensing. This created a credible threat of supply chain disruption for US manufacturers, compelling Washington to prioritize restoring rare earth flows.

Leveraging Legal Instruments

China also employed new legal tools, such as the Export Control Law and the Anti-Foreign Sanctions Law, to create regulatory dilemmas for Western companies. These laws increased risks for firms complying with US sanctions, adding pressure within the US corporate sector to seek de-escalation.

Strategic Patience and Narrative Control

China’s centralized authority under Xi Jinping allowed for long-term policy continuity and narrative control. In contrast to Trump’s reactive approach, China framed negotiations as a defense against “economic bullying,” rallying domestic support and presenting compromises as strategic resistance.

Industrial Resilience and Technological Independence

China’s state-driven industrial substitution bolstered its negotiating position. The Huawei case exemplifies this strategy; despite US restrictions, Huawei launched a 5G smartphone using domestically produced chips. This demonstrated China’s ability to bypass Western technology, weakening US leverage.

Targeted Trade Retaliation

China’s calibrated trade retaliation targeted politically sensitive US exports while selectively granting rare earth export licenses to European firms. This fragmented Western alliances and highlighted Beijing’s capacity to divide pressure coalitions.

Reduced Dependence on Imports

China’s shift towards economic self-reliance reduced its import demand, insulating it from tariff threats. With exports soaring since 2022, China’s vision of trade focuses on exporting without importing, diminishing US leverage.

Lessons for India in Trade Negotiations

As the US pressures India with demands for market access in agriculture and pharmaceuticals, New Delhi can learn from China’s approach. India should leverage its strengths in generics, vaccines, and digital services to negotiate from a position of strength. By introducing targeted export mechanisms and asserting reciprocity-based frameworks, India can secure tangible gains in trade talks.