In a move with far-reaching implications for global supply chains and global diplomacy, China has lifted its export restrictions on rare earths to India. The monumental decision also includes key commodities like fertilizers and tunnel boring machines, and follows high-level talks between Indian External Affairs Minister S. Jaishankar and Chinese Foreign Minister Wang Yi, who assured New Delhi that shipments of the previously restricted items had already resumed.
Relations between India and China have not really been the best in recent years, but the Russian invasion of Ukraine and subsequent fallout have brought the two a bit closer. The curbs, imposed in 2024 amid escalating border tensions, had severely impacted India’s electronics, automotive and infrastructure sectors.
The Increasing Importance of Rare Earths
Rare earth elements are critical to manufacturing modern products like electric vehicles, wind turbines, semiconductors and advanced electronics. However, China controls over 70% of global rare earth production and processing, making its export policies a significant geopolitical lever.
India’s electronics industry, already strained by supply disruptions, welcomed the move. Industry leaders noted that companies producing wearables, EVs, and display technologies had faced acute shortages due to the curbs.
Geopolitical Undercurrents and India’s Response
Analysts caution that while the easing of restrictions on rare earths offers short-term relief, it does not eliminate India’s strategic dependence on Chinese supply chains. Beijing’s pattern of “calibrated concessions,” or toggling access rather than granting permanent stability, is seen by many as a tactic to maintain leverage.
The timing of the announcement, which comes just ahead of Indian Prime Minister Narendra Modi’s expected visit to China for the Shanghai Cooperation Organization summit, suggests a diplomatic thaw. It also comes as India ramps up domestic exploration and production of its own rare earths, with the overarching aim of reducing long-term vulnerabilities.
India has also launched initiatives to diversify its supply base, including opening rare earth mining to private players under the amended Mines and Minerals Act, exploring partnerships with Japan and South Korea for magnet production and accelerating domestic prospecting across over 1,200 sites.
What It Means For The U.S.
The impact of China lifting rare earth export curbs on India is more symbolic than direct as far as the United States is concerned. However, it does send a diplomatic signal.
The U.S. remains subject to Chinese export controls for several key rare earth elements, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. These elements are vital for things like defense systems, EV motors and advanced electronics. While China temporarily paused some curbs for 28 U.S. entities in May of this year, the restrictions on rare earths remain intact.
China’s selective easing for India but not the U.S. is a calculated diplomatic gesture. For starters, it reinforces Beijing’s ability to reward or punish based on geopolitical alignment. India’s recent balancing act between the West and Russia may have earned it this concession, while the U.S. continues to face friction over tech restrictions and tariffs.
A Strong Signal to Washington Regarding Supply
The move should come as a supply chain wake-up call for Washington, underscoring the ongoing urgency of diversifying rare earth supply chains. The 90-day pause granted to some U.S. firms is a narrow window to:
- Secure alternative sources (e.g., Australia, Canada, Africa)
- Invest in domestic processing and recycling
- Push for strategic stockpiling of critical minerals
Following the latest move between India-China, U.S. President Donald Trump reignited trade tensions with the latter country, declaring that the U.S. holds “incredible cards” and could “destroy” China’s economy if pushed. The remarks came during a bilateral meeting with South Korean President Lee Jae Myung, where Trump hinted at imposing tariffs as high as 200% on Chinese rare earth exports unless Beijing resumes shipments of critical magnets.
The Bottom Line
China’s lifting of rare earth export curbs is a welcome development for Indian industry, but it also serves as a reminder of the strategic fragility embedded in global tech and energy supply chains. Whether this marks a genuine reset or a tactical pause remains to be seen.
By Metal Miner
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