Month: August 2025

China committed to resuming critical exports to India during Chinese Foreign Minister Wang Yi’s diplomatic visit to New Delhi, marking a significant breakthrough in bilateral trade relations strained by Beijing’s prolonged restrictions on key commodities.

Chinese Foreign Minister Wang Yi assured External Affairs Minister S. Jaishankar on Monday that China would address India’s pressing concerns regarding the supply of fertilizers, rare earth minerals and tunnel boring machines, according to sources familiar with the discussions. The commitment came during high-level talks that also touched on border peace, economic cooperation and bilateral exchanges.

Strategic Trade Concessions Amid Diplomatic Thaw
According to The Economic Times, China has promised to address India’s three main concerns: rare earths, fertilizers and tunnel boring machines. This assurance represents a reversal of China’s restrictive trade policies that have disrupted Indian industries for nearly a year.

The timing is particularly significant as it follows External Affairs Minister Jaishankar’s visit to China in July, where he first raised these concerns. During his opening remarks with Wang Yi, Jaishankar emphasized that “restrictive trade measures and roadblocks” should be avoided between the two major economies.

China’s Export Restrictions Impact Multiple Sectors
China had imposed extensive export controls starting in April 2025, when it tightened restrictions on rare earth elements citing “end-use regulations” and the need to “safeguard national security”. These measures effectively halted shipments of rare earth magnets essential for India’s electric vehicle and electronics industries.

The fertilizer sector faced similar disruptions, with China suspending exports of specialty fertilizers crucial for high-value crops like fruits and vegetables. India imports approximately 80 percent of its specialty fertilizers from China, with annual imports typically reaching 150,000-160,000 tonnes during the June-December period.

China also blocked tunnel boring machines critical for India’s Mumbai-Ahmedabad bullet train project, creating delays in the ambitious infrastructure initiative.

Broader Diplomatic Context
Wang Yi’s visit comes amid improving India-China relations following an agreement last October on patrolling protocols along the Line of Actual Control. The Chinese Foreign Minister is scheduled to meet Prime Minister Narendra Modi and participate in Special Representative talks with National Security Advisor Ajit Doval on border issues.

The diplomatic engagement occurs ahead of Prime Minister Modi’s expected visit to China for the Shanghai Cooperation Organisation summit from August 31 to September 1, marking his first trip to China in seven years.

Both countries acknowledged the need for closer cooperation amid global uncertainties, particularly regarding U.S. trade policies under President Donald Trump. As one report noted, “both sides agreeing that they need to come closer due to prevailing policies of Washington”.

China supplies nearly 30 percent of fertilizers to India for agriculture, rare earths for auto parts manufacturing, and tunnel boring machines for road and urban infrastructure development. The resumption of these critical supplies could significantly benefit India’s agricultural productivity and industrial development.

India has expanded its ban on jute product imports from Bangladesh through land routes on Monday, restricting these imports to only the Nhava Sheva Seaport amid deteriorating relations between the two neighbors.

The new restrictions, announced by India’s Directorate General of Foreign Trade (DGFT), affect additional jute products including bleached and unbleached woven fabrics of jute or other textile bast fibers, twine, cordage, rope of jute, and sacks and bags of jute. This follows previous bans on June 27 that targeted various other jute products and woven fabrics.

Escalating Trade Tensions
The restrictions mark the latest escalation in trade tensions that have been building since April. Earlier restrictions targeted ready-made garments and processed food items in May, while India also withdrew transhipment facilities for Bangladesh in April, preventing Bangladeshi goods from reaching Middle Eastern and European markets through Indian routes.

These measures come amid strained diplomatic relations following controversial statements by Bangladesh’s interim government chief Muhammad Yunus during his visit to China, where he described India’s northeast as “landlocked” and suggested Chinese access through Bangladesh. India-Bangladesh relations have also deteriorated over concerns about attacks on minorities, particularly Hindus, in Bangladesh under the interim government.

Impact on Bilateral Trade
The restrictions affect a significant portion of India-Bangladesh trade, which stood at $12.9 billion in 2023-24. In 2024-25, India’s exports to Bangladesh reached $11.46 billion while imports totaled $2 billion. Bangladesh’s jute exports to India were valued at approximately $193 million in 2023-24, representing nearly one-fourth of Bangladesh’s total jute exports worth $793 million.

The restrictions force Bangladeshi exporters to redirect shipments to the more expensive Nhava Sheva Seaport in Maharashtra, significantly increasing logistics costs and delivery times. This particularly affects small and medium exporters who relied on cheaper and faster land routes through traditional border crossings.

According to trade analysts, the move is designed to protect India’s domestic jute industry, which employs around 400,000 workers and has faced challenges from subsidized Bangladeshi imports. Despite anti-dumping duties imposed by India, jute imports from Bangladesh rose from $117 million in FY 2021-22 to $144 million in FY 2023-24.

The restrictions signal India’s broader strategy to counter what it views as unfair trade practices while responding to Bangladesh’s growing proximity to China and Pakistan under the interim government. As political tensions continue to spill into economic relations, both countries face the prospect of further disruptions to their historically robust trade partnership.

The Department of Commerce is taking feedback from all stakeholders including exporters and industry for their assessment on the impact of additional tariffs by the United States, the ministry of finance said in the Lok Sabha on August 11, adding that around 55 percent of Indian exports to the US will be subject to 25-percent reciprocal duties.

Reciprocal tariff at the rate of 25 percent has been imposed on certain goods exported from India to the US starting August 7, 2025. It is estimated that around 55 percent of total value of India’s merchandise exports to the US will be subject to this reciprocal tariff, junior finance minister Pankaj Chaudhary said in a written response.

“It may be noted that reciprocal tariffs at varying rates have been imposed by the US on imports from all countries. Combination of different factors such as product differentiation, demand, quality, contractual arrangements would determine the impact on India’s exports,” Chaudhary added.

The ministry added that the government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, exporters, MSMEs, among others, and will take all necessary steps to secure the country’s national interest.