US President Donald Trump’s tariff war with India and China, may result in the two countries forging better trade ties. India and China are expected to begin discussions soon on a trade package involving the supply of essential rare earth magnets, fertilizers, and pharmaceuticals. Although initial outreach has started, the supply of rare earth magnets and all fertilizers from China has not yet resumed.India and China are both worried about the potential trade imbalance in the pharmaceutical sector. Trump’s proposed 250% tariff on finished drugs over the next 18 months could disrupt the industry in both nations.This move could indicate an improvement in relations with China amidst rising tensions with the US and demands from Indian industries to speed up the import of crucial inputs from China, according to an ET report.Also Read | ’Secondary tariffs could go up…’: US official warns of higher sanctions on India if Trump’s talks with Putin fail; asks Europe to ‘put up or shut up’

India-China trade talks amidst Trump’s tariffs

Representatives from both countries are anticipated to meet later this month, coinciding with Prime Minister Narendra Modi’s likely visit to the Shanghai Cooperation Organisation (SCO) summit in Tianjin, scheduled from August 31 to September 1. “The top three items on the agenda for discussion are rare earth magnets, fertilisers and pharmaceuticals,” a senior official informed ET.

Depending on the dragon

The commerce ministry has scheduled a meeting before the SCO summit with key pharmaceutical industry representatives to discuss collaboration and strengthening ties with China as part of broader cooperation efforts. Industry experts told the financial daily that the details of these discussions have not been revealed yet, but they may include strategies to mitigate the impact of US tariffsIndia requires government approval for investments from countries sharing a border with it, a policy specifically targeting its northern neighbor. This comes against a backdrop of escalating tensions over the past five years, including border conflicts and China’s support for Pakistan.Also Read | ‘Don’t think US tariffs will…’: S&P confident Donald Trump’s tariffs won’t impact India’s growth; here’s whyOn April 4, China announced export controls on medium and heavy rare earth-related items to “safeguard national security” in response to US President Donald Trump’s tariffs, citing end-use regulations. Potential talks with Beijing are significant given the 50% tariff Trump has imposed on Indian exports.The US has postponed tariffs on China for 90 days. Rare earth magnets are crucial for various products, particularly electric vehicles. Although China has resumed shipping rare earth magnets to companies in the US, Europe, and Southeast Asia, export licenses for vendors supplying to India have not yet been granted.“Individual clearances for importing these items have not been received yet,” said one source. “Negotiations between the two countries for a trade package will now commence.” In the past three months, Beijing also stopped shipments of urea and some other fertilizers to India. However, it has started easing restrictions on urea supplies to the country.“Tenders for importing urea from China have been issued,” stated a senior executive of a fertilizer company. This suggests that China is willing to send some quantity of the fertilizer to India.Also Read | India-China trade tensions ease! China loosens urea export curbs to India; move comes amidst Trump’s tariff warsState trading enterprises, which import urea from China on behalf of the Indian government, have begun issuing tenders for importing a limited amount of the crop nutrient. Although there is no discussion about specialty fertilizers, discussions are likely progressing, according to informed sources.China had also halted shipments of specialty fertilizers like calcium nitrate and mono ammonium phosphate. India imports about 80% of these chemicals from China.Despite this, Beijing, a global supplier of agricultural inputs, has been exporting them to other countries.