The ongoing tariff tensions between the United States and China — now intensified by Beijing’s latest restrictions on rare earth mineral exports — appear to be opening an unexpected window of opportunity for India. A leading New Delhi-based trade think tank has suggested that Washington’s growing urgency to diversify its critical supply chains away from China could accelerate progress toward a comprehensive US-India trade deal.

According to the Global Trade Research Initiative (GTRI), China’s increasing control over rare earth exports has alarmed policymakers in Washington, who are now looking for trusted allies to build alternative supply routes for strategic minerals and high-value manufacturing components. “China’s tighter control over rare-earth exports and a deepening US-China trade war are forcing Washington to rethink its strategy with allies as it seeks reliable partners to build alternative supply chains,” said Ajay Srivastava, founder of GTRI, in comments to ANI.

The development comes just a day after US Treasury Secretary Scott Bessent identified India as one of Washington’s key partners in what he termed the emerging “China versus the world” contest over critical minerals. These rare earths — indispensable for manufacturing magnets used in automobiles, electronics, green energy, and defence equipment — are overwhelmingly dominated by China, which controls about 80 per cent of the global market.

In recent months, Chinese President Xi Jinping’s government has imposed tighter export curbs on certain rare earth elements, adding new levies and restrictions that have disrupted global supply chains. This move has provoked sharp reactions in Washington and triggered renewed conversations about economic decoupling and trade diversification.

According to GTRI’s assessment, the shifting geopolitical environment could fast-track a potential trade deal between the US and India. “A realignment of trade priorities could accelerate a trade deal with India, with the US likely offering tariff access of around 16–18 per cent — higher than the 15 per cent offered to the EU and Japan, but below the 20 per cent extended to Vietnam,” the think tank said.

Currently, Indian goods entering the American market face average tariffs of around 50 per cent — among the steepest imposed by Washington on any major economy except China and Brazil. About half of these, according to GTRI, stem from former President Donald Trump’s foreign policy decisions, with his administration targeting India for what it viewed as “unfair trade practices” and its continued purchase of discounted Russian oil, which Trump has claimed indirectly funds Moscow’s war in Ukraine.

Ironically, while China is also one of the largest buyers of Russian energy, the Trump administration had until recently adopted a more measured approach toward Beijing. That stance has now shifted sharply. The imposition of new Chinese restrictions on rare earth exports reportedly angered Trump, who responded by preparing to raise tariffs on Chinese goods to over 100 per cent — a move that could further deepen the global trade rift.

India, meanwhile, has remained careful in its response to Trump’s unpredictable trade policies. Prime Minister Narendra Modi — often referred to by Trump as a “great, personal friend” — has adopted a calm, pragmatic tone amid Washington’s shifting moods. According to reports, some of Trump’s earlier frustration toward New Delhi stemmed from Modi’s refusal to endorse Trump’s claim that he had used a tariff threat to force a ceasefire between India and Pakistan during a 2024 border flare-up, codenamed Operation Sindoor.

Despite the political theatrics, trade negotiators from both sides appear to be moving forward. An Indian delegation is currently in Washington for the sixth round of trade talks that first began in April 2025 but were suspended in August following Trump’s renewed tariff escalations. The discussions have now resumed, and officials suggest that the US administration’s urgency to secure alternative trade channels could quicken the pace of progress.

“The negotiating team from India is in the US, and they are trying to see if we can have a win-win solution between the two sides,” a senior government source told ANI. “We are in deeper discussions, and we have seen strong export growth to the US which may continue. Around 45 per cent of our exports to the US remain outside tariff barriers,” the source added.

The GTRI, however, has cautioned that India must negotiate carefully and avoid being drawn into clauses that could undermine its long-term interests. “India must hold firm on its red lines in agriculture, digital trade, e-commerce, and intellectual property, and avoid any anti-China clauses that could limit its strategic autonomy,” the think tank noted. Foreign Minister S. Jaishankar has repeatedly emphasized these red lines in recent months, insisting that India’s trade and foreign policy decisions must preserve flexibility in dealing with all major powers.

Experts believe Washington will continue to push New Delhi for greater market access in certain sensitive sectors, including medical devices, dairy products, and technology services. At the same time, the US is likely to offer expanded access for Indian goods and services that could help balance the bilateral trade deficit, which remains tilted in India’s favour.

The geopolitical stakes behind this trade diplomacy are substantial. The United States sees securing supply chains for its manufacturing industries as a top priority amid growing global instability. Rare earths are critical to technologies ranging from smartphones and wind turbines to fighter jets and missile guidance systems. With China tightening its grip, Washington has turned its attention to nations like India, Vietnam, and Australia to ensure reliable, politically stable sources of these strategic materials.

India, with its growing mining capabilities and expertise in refining certain rare earth compounds, is increasingly being viewed as a natural partner in this effort. At the same time, a trade deal could unlock new opportunities for Indian exporters in textiles, pharmaceuticals, digital services, and engineering goods — sectors where New Delhi has been pushing for preferential market access.

Diplomatic engagement between the two nations has intensified in recent weeks. “Ambassador-designate Sergio Gor was recently in India and met with all key stakeholders,” an official said. Gor also met with Prime Minister Modi, presenting him with a photograph signed by Trump with a handwritten message reading: “Mr Prime Minister, you are great.” The gesture, while symbolic, underscored Trump’s continued personal outreach to the Indian leadership amid the broader policy recalibration in Washington.

For both countries, the potential deal represents more than just a trade agreement — it is part of a broader effort to reshape global supply chains in an era of heightened geopolitical competition. As the US looks to contain China’s dominance in critical technologies, India’s role as a manufacturing and innovation hub could become central to the West’s strategic economic agenda.

Whether the two sides can bridge their differences on key issues such as agriculture, intellectual property, and digital trade remains to be seen. But with the trade war between Washington and Beijing deepening and rare earths emerging as the new fault line in global commerce, the momentum for a US-India deal has rarely looked stronger.