The June 2025 agreement between the US and China to ease export controls marked a significant turning point in their ongoing trade confrontation. Despite President Trump's bluster and maximalist rhetoric, the substance of the deal reveals a Chinese tactical victory. It was Beijing, not Washington, that dictated the pace, terms, and structure of the negotiation. China secured the removal of key US restrictions while offering limited, vague, and easily reversible concessions. There are six key factors that enabled China to extract concessions and stabilise the trade truce on its own terms.
Rare Earth Edge
First, the most potent lever was Beijing's precise restriction of rare earth exports, especially heavy rare earth elements such as dysprosium and samarium-materials indispensable to US defence systems, EV motors, and advanced electronics. Unlike the 2010s, China has since vertically integrated and state-centralised the entire rare earth supply chain, eliminating wildcat miners and enforcing stringent export licensing under "dual-use" military-industrial clauses. The result: a credible threat of supply chain paralysis for US defence and tech manufacturers. This forced Washington to prioritise the restoration of rare earth flows.
Building Pressure Within US
Second, China operationalised a suite of new legal instruments, including the Export Control Law and the Anti-Foreign Sanctions Law, to signal that Western companies could face legal jeopardy if they complied with US sanctions. This placed firms in a regulatory dilemma: violate US law or risk penalties in China. The ambiguity and scope of these laws added risk premiums to US restrictions and created stakeholder pressure within the US corporate sector to seek de-escalation.
Structural Patience
Third, Xi Jinping operates within a system of centralised authority, long-term policy continuity, and near-total control of the narrative. Trump, by contrast, thrives on spectacle, rapid cycles of escalation, and reactive policymaking. China framed the negotiations as a test of national sovereignty and "economic bullying", allowing it to rally domestic support and present any compromise as strategic resistance. The lack of political cost for slow-walking talks gave Beijing structural patience.
Building Their Own
The fourth lever was state-orchestrated industrial substitution and technological resilience. The Huawei case epitomises this lever. Despite US restrictions on chipmaking equipment and AI accelerators, Huawei launched a 5G smartphone in 2023 using domestically produced chips via chiplet "stacking". The perception that Chinese industry could bypass Western tech reinforced Beijing's credibility and deflated US assumptions about sustained technological chokeholds. This industrial resilience signalled to US negotiators that restrictions were increasingly ineffective and self-harming.
Surgical Approach
Fifth, China pursued calibrated trade retaliation and tactical concessions. Rather than blanket retaliation, China issued surgical trade restrictions targeting politically sensitive US exports (e.g. ethane) while selectively granting rare earth export licences to European firms (such as Volkswagen suppliers). This fragmented the Western alliance and demonstrated Beijing's capacity to divide pressure coalitions. In contrast, the US suffered from coalition fatigue and domestic backlash from industry groups over export controls.
No Longer Dependent On Imports
Finally, declining Chinese import demand - especially from the US - provided a kind of strategic insulation. Xi Jinping's shift towards economic self-reliance, emphasising industrial localisation, software substitution, and inward-focused stimulus, has structurally reduced China's import elasticity. China's imports have remained flat, while exports soared 33% since 2022. This makes tariff threats less effective because China no longer needs to import as much. As The Wall Street Journal noted, "China's vision of trade is exporting without importing." This reduces US leverage based on access to its own market.
As the US presses India with a "take-it-or-leave-it" offer in bilateral trade negotiations - demanding sweeping access to India's agricultural, dairy, and pharmaceutical markets - New Delhi must draw critical lessons from how China successfully negotiated with Washington in June 2025. Unlike India, which is now reacting to ultimatums, China entered talks with pre-positioned leverage: a monopoly over rare earth exports, retaliatory legal frameworks, and an insulated domestic economy. India must shift its negotiation strategy from defensive tariff retention to assertive, leverage-backed diplomacy rooted in strategic chokepoints, industrial capability, and phased reciprocity.
India Has Its Own Strengths
First, India must build credible negotiation leverage rooted in operational chokepoints. China controlled the tempo of talks by targeting materials such as dysprosium that the US couldn't easily substitute. India has equivalent strengths in bulk generics, vaccine manufacturing, and digital services - critical nodes in global supply chains. Instead of pre-emptively offering tariff concessions, India should introduce targeted export approval mechanisms or destination-specific licensing for select pharmaceutical categories, such as complex generics and biosimilars, where US import dependence is structurally high. For digital services, India should temporarily pause new cross-border data transfer permissions in sectors such as fintech and health-tech until commercial access and data equivalence frameworks are secured from the U.S.
As Good As One Gets
Second, India must abandon the concessional mindset in market access negotiations and assert a strict reciprocity-based framework. If the US is demanding tariff reductions and the removal of quantitative restrictions in agriculture, dairy, and pharmaceuticals, India must counter with binding and verifiable commitments in return, such as regulatory streamlining, mutual recognition of standards, and preferential access in US government procurement. These must be structured as enforceable deliverables, not political assurances. China played this game precisely: export licences for rare earths were selectively granted to allies and withheld from adversaries until key concessions were extracted. India cannot allow sensitive sectors to be opened without tangible, sector-matched gains. Concessions must be calibrated and time-bound, with sunset clauses if the US fails to reciprocate.
Look Deeper
Third, India must confront the regulatory asymmetry embedded in US trade practices. While headline tariffs may appear low, US non-tariff barriers - including sanitary and phytosanitary (SPS) standards, drug import protocols, and origin compliance measures - function as covert trade restrictions. Indian consignments are routinely rejected for minor technical infractions, creating a chilling effect on exporters. The recent $500,000 consignment of Alphonso mangoes is one such example. These barriers are opaque, discretionary, and often non-negotiable. India must demand binding transparency commitments, risk-based inspection protocols, and pre-clearance mechanisms as preconditions to any tariff realignment. The US-UK "Economic Prosperity Deal" signed in May is a cautionary example: despite tariff concessions, the US retained core restrictions and gave London little commercial value. India must not accept an outcome where headline wins mask structural losses.
Finally, India must impose its own negotiation architecture and sequencing. A modular, multi-phase agreement structure is essential. Begin with trade in services and digital commerce, where India enjoys a surplus and global competitiveness. Reserve tariff liberalisation in agriculture, processed foods, and medical devices for a second or third tranche, contingent on high-value quid pro quo, such as technology access, joint R&D platforms, and strategic investment windows.
The US cannot expect a full-spectrum agreement aligned to its electoral timeline. India's objective must be to maximise strategic value per concession, not to rush a deal for diplomatic closure. China won by controlling the tempo and scope of engagement. India must now do the same-with precision, leverage, and a clear-eyed view of national interest.
(Aditya Sinha (@adityasinha004) writes on macroeconomic and geopolitical issues.)
Disclaimer: These are the personal opinions of the author
