exports

An agreement designed to further liberalise trade between the EU and Kyiv came into force on Wednesday.

It will replace the deal in place since 2016, by expanding tariff-free access for Ukrainian goods and services.

However the new agreement has become a political headache for the European Commission, as Hungary, Poland and Slovakia are not lifting bans on Ukrainian agricultural imports.

“We are engaging with all the parties to try to find solutions,” Commission deputy chief spokesperson Ariana Podesta said on Tuesday.

“We believe (the agreement) is a stable, fair framework, that can be reliable both for the EU and for Ukraine, to ensure a gradual integration in our single market, while providing stable trade flows,” Podesta added.

The new deal includes safeguards limiting imports of certain sensitive products such as grains and oil. Nevertheless, Hungary, Poland and Slovakia have refused to lift their national bans on Ukrainian agri-food imports.

These restrictions were first introduced after the EU opened its market completely to Ukrainian agricultural products following Russia’s invasion of Ukraine, as the Black Sea — a vital export corridor for Kyiv — was effectively blocked.

The resulting land corridors into the EU, designed to keep Ukrainian exports flowing, sparked anger among farmers in neighbouring countries who accused Brussels of allowing unfair competition.

Politically charged

The issue became politically charged, weighing on Poland’s 2023 general election and fuelling tensions in Slovakia and Hungary.

“After the war, imports of agriculture to the EU doubled. We have 117% increase compared to the pre-war levels,” Tinatin Akhvlediani, an expert at the Centre for European Policy Studies (CEPS), told Euronews.

However, Akhvlediani added that “it has been unnecessarily politicised because these Ukrainian goods were easily absorbed by the neighbouring countries.”

Ukraine’s main agricultural exports — grain, sugar and oil — are largely unprocessed goods.

“This is complementary with the trading of the EU because it mostly exports processed agricultural goods,” Akhvlediani explained.

“Ukrainian goods in fact are highly demanded in the EU market. That explains why Ukraine is the third largest import partner for the European Union after Brazil and the UK.”

The new trade deal includes a “safeguard clause” allowing either side to impose protective measures if surging imports damage domestic industries.

Yet this has not eased concerns in neighbouring countries.

“Although Brussels wants to give farmers’ money to Ukraine, we are protecting the resources, the livelihoods of Hungarian producers and our market,” Hungarian Agriculture Minister István Nagy wrote on Facebook on Monday, as he and his EU peers met in Brussels.

The ongoing dispute illustrates the broader obstacles facing Ukraine’s path to EU membership.

Within the bloc, some are concerned about how Ukraine’s enormous agricultural capacity — 42 million hectares of cultivated land, the largest in Europe — would affect the Common Agricultural Policy (CAP), which distributes funds based on farm size.

Even if CAP payments were reformed to focus on production rather than land area, “Ukraine remains quite competitive,” Akhvlediani said.

“The solution could be that the EU puts transition measures in the accession treaty which would limit the benefit from certain policies or not benefit from them at all. This could be the case for the CAP. It’s completely up to the EU,” she concluded.

Romanian President Nicușor Dan, whose country also borders Ukraine, is one of the rare EU leaders to have spoken openly about the issue, saying the discussion about agriculture is “pending”.

According to the Romanian president, the risks of imbalances for the EU are “significant”, especially since Ukraine “does not currently meet the standards that we impose on the agricultural sector in the EU.”

“The discussions taking place are that, in terms of agriculture, Ukraine should have a special status so that it can continue to make significant exports to non-European countries while, in all other clusters, it should be treated as an equal,” Dan said.

Global tensions are escalating over rare earth minerals after China applied severe export controls on critical minerals required to manufacture almost everything – from cars to weapons. The move has also sparked concerns about the global supply chain.

Strategic meetings will be held between European Union officials and Chinese representatives, starting with a videoconference Monday, to be followed by a meeting in Brussels the following day.

Meanwhile, US President Donald Trump will meet his Chinese counterpart Xi Jinping on Thursday in South Korea, with financial markets attentive to whether the world’s two largest economic powers can bury the hatchet in their trade war.

At the heart of the dispute is China’s 9 October decision to restrict exports of rare earth elements. While these controls were initially a response to US tariffs, the EU has become collateral damage in the dispute and is considering ways to respond.

Why is China restricting rare earth exports?

Tensions first emerged between the US and China after Donald Trump returned to the White House and carried through an aggressive tariff policy – which the administration argues is needed to narrow a growing trade deficit – on allies and rivals alike.

On 2 April 2025 — coinciding with what Trump defined as US’ “Liberation Day” — Washington announced a 34% tariff on Chinese goods imported into the country, which, added to the existing 20%, brought total duties to 54%.

The trade war escalated after China responded with counter-tariffs, which surpassed the 100% threshold, making trade between the two practically impossible. Beyond the tariffs, to hit back, China looked to weaponise its monopoly over rare earth elements, imposing additional export restrictions on 4 April that have since remained in place.

Rare earths are a group of 17 elements used across the defence, electric vehicle, energy and electronics industries.

The world, including the EU, is heavily dependent on China, as the country controls 60% of global production and 90% of their refining, according to the International Energy Agency (IEA).

After a short truce, the dispute flared up again in September, and on 9 October 2025, China decided to extend its control over rare earth elements from seven to 12. The announcement was seen as China building leverage over the United States. The meeting between the two sides this week is crucial in dictating the path forward.

Meanwhile, the EU is caught between the two. While these restrictions aimed mostly at the US, it has also impacted the European industry. The controls take the form of licenses that are difficult to obtain, with European companies bearing the brunt, as European Commisisioner for Trade Maroš Šefčovič has repeatedly pointed out.

How is the EU responding?

In a speech over the weekend, European Commission President Ursula von der Leyen, said the Union is prepared to use all the tools at its disposal to combat what some European leaders, including French President Emmanuel Macron, have described as economic coercion from China.

The remarks from the Commission president alluded to what is known as the anti-coercion instrument – designed with China in mind but never used.

The ACI, adopted in 2023, would allow the EU hit back at a third country by imposing tariffs or even restricting access to public procurement, licenses, or intellectual property rights.

“In the short term, we are focusing on finding solutions with our Chinese counterparts,” Commission president Ursula von der Leyen said on Saturday, warning, however, “But we are ready to use all of the instruments in our toolbox to respond if needed.”

European Council President António Costa met on Monday with Chinese Premier Li Qiang on the sidelines of the ASEAN Summit in Kuala Lumpur.

“I shared my strong concern about China’s expanding export controls on critical raw materials and related goods and technologies,” Costa said after the meeting, adding: “I urged him to restore as soon as possible fluid, reliable and predictable supply chains.”

Yet, tensions persist.

A planned meeting between Šefčovič and his Chinese counterpart Wang Wentao was cancelled and replaced by high-level talks between Chinese and European experts, a Commission spokesperson has confirmed. A video conference took place on Monday, and Chinese officials are set to arrive in Brussels for a meeting on Thursday.

While Brussels insists it wants to achieve a constructive solution without escalating, the Commission is pursuing a “de-risking” strategy to reduce its dependence on Chinese minerals. In addition, Germany and France have also suggested they would support stronger trade measures if a comprehensive solution cannot be found.

On Saturday, Von der Leyen announced a new plan – RESourceEU – exploring joint purchasing and stockpiling of rare earth, as well as “strategic” projects for the production and processing of critical raw materials here in Europe.

The EU also hopes to diversify its suppliers worldwide.

“We will speed up work on critical raw materials partnerships with countries like Ukraine and Australia, Canada, Kazakhstan, Uzbekistan, Chile or Greenland,” von der Leyen said.

Under blazing skies at a tea plantation in India’s northeastern state of Assam, worker Kamini Kurmi wears an umbrella fastened over her head to keep her hands free to pluck delicate leaves from the bushes.

“When it’s really hot, my head spins and my heart begins to beat very fast,” said Kurmi, one of the many women employed for their dextrous fingers, instead of machines that harvest most conventional crops within a matter of days.

Weather extremes are shrivelling harvests on India’s tea plantations, endangering the future of an industry renowned for beverages as refreshing as the state of Assam and the adjoining hill station of Darjeeling in West Bengal state, while reshaping a global trade estimated at more than $10bn a year.

“Shifts in temperature and rainfall patterns are no longer occasional anomalies; they are the new normal,” said Rupanjali Deb Baruah, a scientist at the Tea Research Association.

As changing patterns reduce yields and stall output, rising domestic consumption in India is expected to shrink exports from the world’s second-largest tea producer.

While output stagnates in other key producers such as Kenya and Sri Lanka, declining Indian exports, which made up 12 percent of global trade last year, could boost prices.

Tea prices at Indian auctions have grown by just 4.8 percent a year for three decades, far behind the 10 percent achieved by staples such as wheat and rice.

The mildly warm, humid conditions crucial for Assam’s tea-growing districts are increasingly being disrupted by lengthy dry spells and sudden, intense rains.

Such weather not only helps pests breed, but also forces estate owners to turn to the rarely used practice of irrigating plantations, said Mritunjay Jalan, the owner of an 82-year-old tea estate in Assam’s Tinsukia district.

Rainfall there has dropped by more than 250mm (10 inches) between 1921 and 2024, while minimum temperatures have risen by 1.2 degrees Celsius (2.2 degrees Fahrenheit), the Tea Research Association says.

The monsoon, Assam’s key source of rain, as summer and winter showers have nearly disappeared, brought rainfall this season that was 38 percent below average.

That has helped to shorten the peak output season to just a few months, narrowing the harvesting window, said senior tea planter Prabhat Bezboruah.

Patchy rains bring more frequent pest infestations, leaving tea leaves discoloured, blotched brown, and sometimes riddled with tiny holes.

These measures, in turn, add to costs, which are already rising at 8 to 9 percent a year, driven up by higher wages and prices of fertiliser, said Hemant Bangur, chairman of the leading industry body, the Indian Tea Association.

Planters say government incentives are insufficient to spur replanting, crucial in Assam, where many colonial-era tea bushes yield less and lose resilience to weather as they age beyond the usual productive span of 40 to 50 years.

India’s tea industry has flourished for nearly 200 years, but its share of global trade could fall below the 2024 figure of 12 percent, as the increasing prosperity of a growing population boosts demand at home.

Domestic consumption jumped 23 percent over the past decade to 1.2 million tonnes, far outpacing production growth of 6.3 percent, the Indian Tea Association says.

While exports of quality tea have shrunk in recent years, India’s imports have grown, nearly doubling in 2024 to a record 45,300 tonnes.

That adds expense for overseas buyers, said executives of India’s leading merchants, at a time when global competitors such as Kenya face similar problems.

Control over lucrative exports was a major point of contention between Baghdad and Kurdistan region, with a key pipeline to Turkiye shut since 2023.

Iraq has resumed crude oil exports from the semi-autonomous Kurdistan region to Turkiye after an interim deal broke a two-and-a-half-year deadlock over legal and technical disputes.

The resumption started at 6am local time (03:00 GMT), according to a statement from Iraq’s oil ministry on Saturday. “Operations started at a rapid pace and with complete smoothness without recording any significant technical problems,” the ministry said.

Turkish Energy Minister Alparslan Bayraktar also confirmed the development in a post on X.

The agreement between Iraq’s federal government, the Kurdistan regional government (KRG) and foreign oil producers operating in the region will allow 180,000 to 190,000 barrels per day (bpd) of crude to flow to Turkiye’s Ceyhan port, Iraq’s oil minister told Kurdish broadcaster Rudaw on Friday.

The resumption follows a tripartite agreement reached earlier this week between the ministry, the Kurdish region’s natural resources ministry, and international oil companies operating in the region.

The United States had pushed for a restart, which is expected to eventually bring up to 230,000 bpd of crude back to international markets at a time when the Organization of the Petroleum Exporting Countries (OPEC) is boosting output to gain market share. US Secretary of State Marco Rubio welcomed the deal in a statement, saying it “will bring tangible benefits for both Americans and Iraqis”.

Iraq’s OPEC delegate, Mohammed al-Najjar, said his country can export more than it is now after the resumption of flows via the Kirkuk-Ceyhan pipeline, in addition to other planned projects at Basra port, state news agency INA reported on Saturday.

“OPEC member states have the right to demand an increase in their [production] shares especially if they have projects that led to an increase in production capacity,” he said.

Companies operating in the Kurdistan region will receive $16 per barrel to cover production and transportation costs. The eight oil companies that signed the deal and the Kurdish authorities have agreed to meet within 30 days of exports resuming to work on a mechanism for settling the outstanding debt of $1bn the Kurdistan region owes to the firms.

Control over lucrative oil exports has been a major point of contention between Baghdad and Erbil, with the deal seen as a step towards boosting Iraq’s oil revenues and stabilising the relationship between the central government in Baghdad and the Kurdish region.

Oil exports were previously independently sold by the Kurdish authorities, without the approval or oversight of the federal authorities in Baghdad, through the port of Ceyhan in Turkiye.

The Kirkuk-Ceyhan pipeline was halted in March 2023 when the International Chamber of Commerce in Paris ordered Turkiye to pay Iraq $1.5bn in damages for unauthorised exports by the Kurdish regional authorities.

The Association of the Petroleum Industry of Kurdistan, which represents international oil firms operating in the region, put losses to Iraq since the pipeline closed at more than $35bn.

Ukraine has worsened fuel shortages across Russia in the past week as it has continued to hit Russia’s refineries and energy infrastructure with long-range drones while Poland has called for more oil sanctions in the wake of Russia’s first drone attack on NATO soil.

In the meantime, Russia’s creeping advance resulted in the capture of three villages over the past week, and perhaps for the first time, Ukraine’s command reacted by dismissing the retreating officers.

Russian forces took the villages of Sosnovka and Novonikolayevka in Dnipropetrovsk and Olhivske/Olgovskoye in Zaporizhia.

Ukrainian commander-in-chief Oleksandr Syrskii on Monday fired the two officers in charge of the 17th and 20th army corps, which are based in the two respective regions.

Since 2024, Ukraine has fought through slow, tactical retreats designed to cede limited ground for disproportionately high Russian casualties.

The Institute for the Study of War, a Washington-based think tank, has estimated that in May, June, July and August, Russia took 1,910sq km (737.5sq miles) of Ukrainian territory at a cost of 130,000 casualties, averaging 68 casualties per square kilometre.

Syrskyi’s dismissals could indicate a tougher approach towards land losses going forward.

Russian forces were suffering “significant losses” in Kupiansk and Dobropillia, two of the hottest points along the front, Ukrainian President Volodymyr Zelenskyy said on Sunday.

Ukrainian defenders were advancing towards the Russian border in Sumy in northern Ukraine, he said.

Ukraine’s strategy – not purely defensive

Ukraine has launched a two-pronged strategy this year to choke off fuel supplies to the Russian economy and military and to kill Russian revenues from energy exports.

“The most effective sanctions – the ones that work the fastest – are the fires at Russia’s oil refineries, its terminals, oil depots,” Zelenskyy said in an evening address to the Ukrainian people on Sunday.

“Russia’s war is essentially a function of oil, of gas, of all its other energy resources,” he said.

That day, Ukraine crippled Russia’s second largest refinery when its drones struck a processing unit accounting for 40 percent of the plant’s capacity.

Russian authorities said they shot down 361 drones, suggesting there were many other targets as well.

Industry sources told the Reuters news agency that the Kirishinefteorgsintez refinery, located in the northwestern town of Kirishi, would boost production at other units. Even so, the refinery could operate only at three-quarters of its capacity.

Last year, it produced 7.1 million tonnes of diesel and 6.1 million tonnes of fuel oil for ships.

Two days after the Kirishi strike, Ukraine’s military reported it also struck the Saratov refinery, which supplies the Russian military.

There is mounting evidence that the first prong of Ukraine’s strategy is working.

Russian state newspaper Izvestiya reported last week that fuel shortages had spread to 10 Russian republics and regions, including the central regions of Ryazan, Nizhny Novgorod, Saratov and Rostov as well as occupied Crimea.

Izvestiya’s report was based on interviews with the Russian Independent Fuel Union, an association of petrol station owners, which said many petrol stations had not received deliveries for several weeks and had been forced to shut down.

Regional governors have also recently confirmed fuel shortages.

Ukraine has struck at least 10 major Russian refineries this year, and the commander of its Unmanned Systems Forces estimated Russia has lost one-fifth of its refining capacity.

“The Russian war machine will only stop when it runs out of fuel,” Zelenskyy told the annual Yalta European Strategy Meeting in Kyiv on Friday. “And Putin will begin to stop it himself when he himself truly feels that the resources for war are running out.”

Fewer exports

The second prong of Ukraine’s strategy, choking off Russia’s cashflow from oil and fuel exports, has also been highly successful.

On Friday, Ukrainian drones struck Russia’s largest oil offloading terminal at Primorsk on the Baltic Sea, according to sources at Ukraine’s Security Service (SBU).

The strike caused a fire at the pumping station and a ship moored next to it, forcing the terminal to suspend shipments, Ukrainian outlet Suspilne reported.

Ukraine also struck pumping stations along the Transneft Baltic Pipeline System-2, which supplies crude oil to offloading terminals in the port of Ust-Luga, also in the Leningrad region.

“Oil and gas revenues have accounted for between a third and half of Russia’s total federal budget proceeds over the past decade, making the sector the single most important source of financing for the government,” Reuters said.

Russia has banned all exports of refined petroleum products since February and sought to increase exports of crude oil instead.

But even that goal may not be possible.

Russia’s biggest pipeline operator, Transneft, has reportedly told upstream oil producers they may have to cut their output because Ukrainian strikes have degraded its ability to store and carry oil to refineries and export terminals, according to three industry sources who spoke to Reuters.

Transneft dismissed the report as “fake news”.

EU seeks to end all imports

Poland called for a complete ban of Russian oil imports to the European Union after 19 Russian drones entered its airspace on September 10.

Most of the EU has banned Russian oil imports, but Hungary and Slovakia have an exemption until the end of 2027 because they said it’s cheaper for them to import oil via pipeline from Russia than to receive it through other EU countries.

That may change, the European Commission chief said on Tuesday. “The Commission will soon present its 19th package of sanctions, targeting crypto, banks, and energy,” President Ursula von der Leyen wrote on social media. “The Commission will propose speeding up the phase-out of Russian fossil imports.”

Ongoing sales of Russian energy to Europe have been a topic of concern.

Official EU imports of Russian oil have dropped by an estimated 90 percent since Russia’s invasion of Ukraine, according to estimates from the EU’s statistical service.

However, the EU never actually banned Russian gas, and the London-based think tank Ember has estimated it paid Russia $23.6bn for gas last year – almost $5bn more than it paid in military aid to Ukraine.

“I urge all partners to stop looking for excuses not to impose particular sanctions,” Zelenskyy said on Saturday. “If [Russian President Vladimir] Putin does not want peace, he must be forced into it.”

Berlin says it will halt shipments of military equipment that could be used in Gaza after the Israeli security cabinet approved a plan to expand the war.

Germany has suspended all military exports to Israel that could be used in Gaza after Israel’s security cabinet approved a plan to take over Gaza City, an escalation in the 22-month war.

Chancellor Friedrich Merz announced the decision on Friday, shortly after Israeli Prime Minister Benjamin Netanyahu’s office confirmed the security cabinet voted in favour of a plan to seize the largest city in the besieged Palestinian territory.

A day earlier, Netanyahu had declared that Israeli forces were aiming to take full military control of the entire Gaza Strip despite mounting international condemnation over Israel’s war, which has killed tens of thousands of people and caused a starvation crisis.

“Under these circumstances, the German government will not authorise any exports of military equipment that could be used in the Gaza Strip until further notice,” Merz said.

While continuing to back what he called Israel’s “right to defend itself” and the release of captives held by Hamas, Merz stressed that Germany could no longer ignore the worsening toll on civilians.

“The even harsher military action by the Israeli army in the Gaza Strip, approved by the Israeli cabinet last night, makes it increasingly difficult for the German government to see how these goals will be achieved,” he said.

The timing of another major ground operation remains unclear since it will likely hinge on mobilising thousands of soldiers and forcibly removing civilians, almost certainly exacerbating the humanitarian catastrophe.

Gaza health authorities said 197 people, including 96 children, have died of malnutrition during the war in Gaza as Israel continues to impose severe restrictions on supplies of humanitarian aid. A United Nations-backed assessment has warned that famine is unfolding in the enclave.

Merz urged Israel to allow full and sustained access for humanitarian groups, including the UN and NGOs, to help civilians.

“With the planned offensive, the Israeli government bears even greater responsibility than before for providing for their needs,” Merz added.

He also warned Israel against any steps towards annexing the occupied West Bank.

In July, the Israeli parliament approved a symbolic measure calling for the annexation of the West Bank.

From October 2023 to May this year, Germany issued arms export licences to Israel worth 485 million euros ($564m), making it one of Israel’s key military suppliers, according to figures from the German parliament.

Netanyahu’s office said the Israeli army “will prepare to take control of Gaza City while providing humanitarian aid to the civilian population outside the combat zones”.

Trump imposed tariffs on dozens of countries in advance of his August 1 deadline to strike trade deals.

US President Donald Trump has signed an executive order reimposing “reciprocal tariffs” ranging from 10 percent to 41 percent on US imports from dozens of countries and foreign locations.

Separately, Trump also signed an executive order late on Thursday that increased tariffs on certain Canadian goods, with the White House accusing Ottawa of failing to “cooperate in curbing the ongoing flood of fentanyl and other illicit drugs” entering the US.

In a statement on Thursday titled “Further Modifying the Reciprocal Tariff Rates”, the US listed some 69 trading partners and their respective “adjusted” tariff rates.

US-bound exports from some of Washington’s major trading partners – including Australia and the UK – will be subject to the baseline rate of 10 percent.

Other major trading partners – including India at 25 percent and Taiwan at 20 percent – have had higher rates imposed as slow-moving trade deal negotiations continue.

Trump cited the “continued lack of reciprocity in our bilateral trade relationships” in a statement on the White House website announcing the reimposition of the tariffs.

“I have determined that it is necessary and appropriate to deal with the national emergency declared in Executive Order 14257 by imposing additional ad valorem duties on goods of certain trading partners,” he said.

The White House also published a fact sheet on the increase in Canada’s tariff rate. In the release, Trump lamented “Canada’s continued inaction and retaliation” on addressing the “flow of illicit drugs” into the US across its northern border.

“President Trump has found it necessary to increase the tariff on Canada from 25% to 35% to effectively address the existing emergency,” the White House said, adding that the new rates go into effect on August 1.

The fact-sheet said goods that qualify for preferential treatment under the United States-Mexico-Canada Agreement (USMCA) would not be subject to tariffs.

Soon after returning to office in January, Trump declared a national emergency under the International Emergency Economic Powers Act (IEEPA), citing a “public health crisis caused by fentanyl and illicit drugs” flowing into the US from Canada.

The US is also set to implement new rules of origin to determine tariff rates on trans-shipped goods in the coming weeks, the Reuters news agency reports, citing an unnamed senior Trump administration official.

Transhipped goods are those moved between vessels at an intermediate destination during transit to their final destination. The technicalities of the rules are being worked out, the official added.

Talks lay groundwork for a summit between EU and Chinese leaders in Beijing on July 24 and 25.

The European Union’s foreign policy chief has urged China to end restrictions on the export of rare earth elements and warned that Chinese firms’ support for Russia’s war in Ukraine posed a serious threat to European security.

The statement from Kaja Kallas came on Wednesday after a meeting with Chinese Foreign Minister Wang Yi in Brussels.

The EU is seeking to improve its relations with China amid United States President Donald Trump’s tariff war, which has rocked major trading powers.

But instead of improvements, a trade spat has only deepened between Brussels and Beijing over alleged unfair practices by China. The 27-nation bloc is also railing against the flow of vital tech to Russia’s military through China.

On Wednesday in her meeting with Wang, Kallas “called on China to put an end to its distortive practices, including its restrictions on rare earths exports, which pose significant risks to European companies and endanger the reliability of global supply chains”, a statement from her office said.

On trade, Kallas urged “concrete solutions to rebalance the economic relationship, level the playing field and improve reciprocity in market access”.

She also “highlighted the serious threat Chinese companies’ support for Russia’s illegal war poses to European security”.

China says it does not provide military support to Russia for the war in Ukraine. But European officials say Chinese companies provide many of the vital components for Russian drones and other weapons used in Ukraine.

Kallas called on China “to immediately cease all material support that sustains Russia’s military industrial complex” and support “a full and unconditional ceasefire” and a “just and lasting peace in Ukraine”.

Wednesday’s discussions were to lay the groundwork for a summit between EU and Chinese leaders on July 24 and 25. European Council President Antonio Costa and European Commission President Ursula von der Leyen will travel to China for the summit with Chinese President Xi Jinping and Premier Li Qiang.

Earlier in the day, Wang also met Costa as part of those preparations.

In that meeting, Wang called on both sides to respect each other’s core interests and increase mutual understanding, adding that “unilateralism and acts of bullying have seriously undermined the international order and rules”, according to a Chinese Foreign Ministry statement.

Besides discussions on improving bilateral ties, Kallas and Wang also discussed the situation in Iran.

While both leaders welcomed the de-escalation between Israel and Iran, Kallas said she had “urged Iran to immediately restart negotiations on its nuclear programme and that Europe stands ready to facilitate talks”, according to a statement from her office.

Kallas and Wang also “agreed on the importance of the Nuclear Non-Proliferation Treaty as the cornerstone of the global nuclear non-proliferation regime”.

The EU, the United Kingdom, France and Germany are parties to a 2015 nuclear deal with Iran that the United States abandoned in 2018, which they hope to revive. Iran has always said its nuclear programme is peaceful and denies seeking a weapon.

China’s export of rare earth elements is central to the trade deal struck this week with the United States.

Beijing has a virtual monopoly on the supply of the critical minerals, which are used to make everything from cars to drones and wind turbines.

Earlier this year, Beijing leveraged its dominance of the sector to hit back at US President Donald Trump’s sweeping tariffs, placing export controls on seven rare earths and related products.

The restrictions created a headache for global manufacturers, particularly automakers, who rely on the materials.

After talks in Geneva in May, the US and China announced a 90-day pause on their escalating tit-for-tat tariffs, during which time US levies would be reduced from 145 percent to 30 percent and Chinese duties from 125 percent to 10 percent.

The truce had appeared to be in jeopardy in recent weeks after Washington accused Beijing of not moving fast enough to ease its restrictions on rare earths exports.

After two days of marathon talks in London, the two sides on Wednesday announced a “framework” to get trade back on track.

Trump said the deal would see rare earth minerals “supplied, up front,” though many details of the agreement are still unclear.

What are rare earths, and why are they important?

Rare earths are a group of 17 elements that are essential to numerous manufacturing industries.

The auto industry has become particularly reliant on rare-earth magnets for steering systems, engines, brakes and many other parts.

China has long dominated the mining and processing of rare earth minerals, as well as the production of related components like rare earth magnets.

It mines about 70 percent of the world’s rare earths and processes approximately 90 percent of the supply. China also maintains near-total control over the supply of heavy rare earths, including dysprosium and terbium.

China’s hold over the industry had been a concern for the US and other countries for some time, but their alarm grew after Beijing imposed export controls in April.

The restrictions affected supplies of samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, and required companies shipping materials and finished products overseas to obtain export licences.

The restrictions followed a similar move by China in February, when it placed export controls on tungsten, bismuth and three other “niche metals”.

While news of a deal on rare earths signals a potential reprieve for manufacturers, the details of its implementation remain largely unclear.

What has been the impact of the export restrictions?

Chinese customs data shows the sale of rare earths to the US dropped 37 percent in April, while the sale of rare earth magnets fell 58 percent for the US and 51 percent worldwide, according to Bloomberg.

Global rare earth exports recovered 23 percent in May, following talks between US and Chinese officials in Geneva, but they are still down overall from a year earlier.

The greatest alarm has been felt by carmakers and auto parts manufacturers in the US and Europe, who reported bottlenecks after working their way through inventories of rare earth magnets.

“The automobile industry is now using words like panic. This isn’t something that the auto industry is just talking about and trying to make a big stir. This is serious right now, and they’re talking about shutting down production lines,” Mark Smith, a mining and mineral processing expert and the CEO of the US-based NioCorp Developments, told Al Jazeera.

Even with news of a breakthrough, Western companies are still worried about their future access to rare earths and magnets and how their dependence on China’s supply chain could be leveraged against them.

The Financial Times reported on Thursday that China’s Ministry of Commerce has been demanding “sensitive business information to secure rare earths and magnets” from Western companies in China, including production details and customer lists.

What have the US and China said about rare earth exports?

Trump shared some details of the agreement on his social media platform, Truth Social, where he also addressed concerns about rare earths and rare earth magnets.

“We are getting a total of 55% tariffs, China is getting 10%. The relationship is excellent,” Trump said, using a figure for US duties that includes levies introduced during his first term.

“Full magnets, and any necessary rare earths, will be supplied, up front, by China. Likewise, we will provide to China what was agreed to, including Chinese students using our colleges and universities (which has always been good with me),” Trump said.

Ahead of the negotiations in London, China’s Ministry of Commerce had said it approved an unspecified number of export licences for rare earths, and it was willing to “further strengthen communication and dialogue on export controls with relevant countries”.

However, an op-ed published by state news outlet Xinhua this week said rare earth export controls were not “short-term bargaining tools” or “tactical countermeasures” but a necessary measure because rare earths can be used for both civilian and military purposes.

NioCorp Developments’ Smith said Beijing is unlikely to quickly give up such powerful leverage over the US entirely.

“There’s going to be a whole bunch of words, but I really think China is going to hold the US hostage on this issue, because why not?” he said.

“They’ve worked really hard to get into the position that they’re in. They have 100 percent control over the heavy rare earth production in the world. Why not use that?”

Deborah Elms, the head of trade policy at the Hinrich Foundation in Singapore, said it was hard to predict how rare earths would be treated in negotiations, which would need to balance other US concerns like China’s role in exporting the deadly opioid fentanyl to the US.

Beijing, for its part, will want guarantees that it can access advanced critical US technology to make advanced semiconductors, she said.

As I write this in 2025, I find myself increasingly concerned about India’s manufacturing trajectory. While India celebrates digital prowess and service sector dominance, a stark reality confronts my country: our manufacturing exports as a percentage of global trade have remained stubbornly stagnant at around 1.7%, even as China commands over 15% and Vietnam has surged to capture significant market share in textiles, electronics, and manufacturing.

The time for incremental reforms has passed.

India needs a comprehensive overhaul of its export and entrepreneurship policies, strategically aligned with foreign policy objectives, to prevent what I believe could be a permanent relegation to service sector dependency while manufacturing opportunities slip away to more agile competitors.

The Manufacturing Imperative

The numbers paint a sobering picture. China’s manufacturing value-added reached $4.9 trillion in 2023, accounting for roughly 30% of global manufacturing output.

Vietnam, with a population less than 7% of India’s, achieved manufacturing exports of $370 billion in 2023, compared to India’s $450 billion total merchandise exports across all sectors.

More critically, India’s share in global manufacturing exports has declined from 1.8% in 2019 to 1.7% in 2024, while Vietnam’s share grew from 2.1% to 3.4% in the same period.

This isn’t just about absolute numbers; it’s about momentum and trajectory.

Countries like Bangladesh, Mexico, and Turkey are all gaining ground in manufacturing exports while India debates policy frameworks.

The demographic dividend we often celebrate is actually a ticking time bomb. With 12 million Indians entering the workforce annually, service sector jobs alone cannot provide sufficient employment. Manufacturing historically creates 3-4 jobs for every direct job, compared to 1.5-2 jobs in services. Without a manufacturing renaissance, we risk social instability and economic stagnation.

The Export-Foreign Policy Nexus: Learning from Successful Models

My analysis of successful export economies reveals a crucial insight: export policies cannot operate in isolation from foreign policy. China’s Belt and Road Initiative isn’t just infrastructure investment; it’s export market creation. Vietnam’s export success stems partly from its strategic positioning between US-China tensions, attracting supply chain diversification.

India needs to reimagine its foreign policy through an export lens. Our current approach treats trade and diplomacy as separate domains, resulting in missed opportunities. For instance, our Act East Policy has yielded modest results in manufacturing exports to ASEAN, partly because we haven’t aligned trade facilitation with diplomatic priorities.

Consider this data point: India’s bilateral trade with Africa was $98 billion in 2023, but only 25% consisted of manufactured goods exports. China’s Africa trade was $282 billion, with 45% being manufactured exports. This disparity isn’t just about market access; it reflects China’s systematic alignment of diplomatic engagement with export promotion.

The Compliance Raj: Quantifying the Regulatory Stranglehold

Our current export promotion architecture suffers from what I call “scheme fatigue,” but the deeper malady is what recent analysis terms the “Compliance Raj”—a” systematic regulatory stranglehold that makes Vietnam and China look like libertarian paradises by comparison.

The numbers are staggering: India experienced 9,420 compliance updates in 2024 alone, averaging 36 daily regulatory changes. To put this in perspective, Vietnamese manufacturers face approximately 12 major regulatory updates annually, while Chinese exporters operate under relatively stable regulatory frameworks with predictable annual changes.

The India Business Corruption Survey 2024 reveals that 66% of businesses admitted to paying bribes, with 54% coerced for permits, licenses, or approvals. This isn’t just about corruption; it’s about competitive disadvantage. While Indian exporters navigate bribery demands and regulatory uncertainty, Vietnamese competitors focus on production efficiency and market expansion.

The Production Linked Incentive (PLI) scheme, while well-intentioned, allocated $26 billion across 14 sectors over five years. China spends more than this amount annually on manufacturing subsidies and export promotion. Vietnam’s foreign direct investment in manufacturing reached $22 billion in 2023 alone, compared to India’s $15 billion across all sectors.

The bureaucratic maze compounds these challenges beyond previous estimates. Businesses are required to manage 23 different identity numbers, including PAN, GSTIN, and CIN, resulting in excessive paperwork and frequent renewals.

A recent study by the Confederation of Indian Industry found that compliance costs for Indian exporters are 23% higher than Chinese competitors and 31% higher than Vietnamese exporters. But when we factor in time lost to regulatory uncertainty and bribery, the real competitive disadvantage reaches 45-50%.

Our export infrastructure remains fragmented. While China has 34 ports handling over 10 million TEU annually, India has only 12 major ports with combined capacity struggling to match Shanghai alone. Logistics costs consume 13-14% of GDP compared to 8-9% in developed economies, directly impacting export competitiveness.

The Libertarian Imperative

The evidence is overwhelming: countries that have embraced more libertarian approaches to business regulation consistently outperform India in manufacturing exports. This isn’t ideological positioning; it’s empirical reality backed by hard data.

Singapore, despite its small size, achieved $470 billion in total trade in 2023 with minimal regulatory complexity. Businesses can be registered in 15 minutes online, with most permits issued within 2-3 days. The regulatory framework is predictable, with major changes announced annually and implemented systematically.

Vietnam’s success partly stems from its increasingly libertarian approach to export manufacturing. Export processing zones operate under simplified regulations, with businesses facing minimal compliance burden once established. The contrast with India is stark: Vietnamese exporters spend 2-3% of their time on compliance activities, compared to 15-18% for Indian counterparts.

Even within India, states that have adopted more libertarian approaches show superior performance. Gujarat’s single-window clearance system, operational since 2009, has attracted significantly higher manufacturing FDI per capita compared to states with complex approval processes. Tamil Nadu’s simplified labor regulations for export industries have made it a preferred destination for automotive and textile manufacturing.

The Jan Vishwas Act 2023 decriminalized 180 provisions, reducing imprisonment risks for minor business violations. While this represents progress, it barely scratches the surface. With 20,000 imprisonment clauses still in place and the proposed Jan Vishwas 2.0 targeting only 100 additional provisions, we’re implementing incremental reforms when radical deregulation is required.

Consider the regulatory approach differences: A smartphone manufacturer in India faces 67 different approvals across 14 agencies, compared to 23 approvals across 6 agencies in Vietnam and just 12 approvals across 4 agencies in Singapore. This isn’t about maintaining standards; it’s about regulatory rent-seeking that destroys competitiveness.

The libertarian solution isn’t about abandoning all regulations; it’s about smart regulation focused on outcomes rather than processes. Export-oriented manufacturing should operate under presumptive compliance—businesses assume compliance unless proven otherwise, rather than seeking pre-approvals for every activity.

The Vietnam Model: Libertarian Agility Over Bureaucratic Scale

Vietnam’s transformation offers crucial lessons in libertarian reform applied to export manufacturing. Between 2010 and 2023, Vietnam increased its manufacturing exports from $72 billion to $370 billion, a 414% growth compared to India’s 185% growth from $178 billion to $450 billion in total merchandise exports.

Vietnam’s success stems from three key libertarian principles that India must embrace:

Regulatory Minimalism: Vietnam’s export sector operates under what economists call “libertarian” zones”—areas where businesses face minimal regulatory interference once basic standards are met. While India debates comprehensive labor law reforms, Vietnam implemented sector-specific deregulation for export manufacturing, allowing 24/7 operations, flexible hiring, and performance-based compensation without bureaucratic approvals.

Strategic FDI Targeting with Minimal Barriers: Vietnam attracted $108 billion in manufacturing FDI between 2015 and 2023, focusing on electronics, textiles, and automotive components with streamlined approval processes. India received $67 billion in manufacturing FDI in the same period, spread across too many sectors with complex approval requirements. Vietnamese authorities can approve major manufacturing investments within 45 days; Indian approvals take 8-12 months on average.

Export Processing Zone Efficiency: Vietnam operates 16 EPZs contributing 40% of total exports, with average clearance times of 8 hours and minimal compliance requirements once operational. India’s 265 SEZs contribute only 25% of exports with average clearance times of 72 hours and continuous compliance monitoring that disrupts operations.

Trade Agreement Leverage: Vietnam has 16 operational FTAs covering 58 countries, compared to India’s 13 FTAs covering 32 countries. More importantly, Vietnam utilizes these agreements effectively—67% of Vietnamese exports benefit from preferential access compared to 31% for Indian exports. The difference lies in implementation: Vietnam’s streamlined customs procedures make FTA utilization cost-effective, while India’s complex procedures often make preferential rates economically unviable.

The China Challenge

China’s manufacturing dominance isn’t accidental; it’s systematically built through what I observe as a four-pronged strategy: technology acquisition, market creation, supply chain control, and financial leverage.

China’s outbound FDI in manufacturing reached $145 billion in 2023, often creating captive markets for Chinese exports. India’s outbound manufacturing investment was $8.2 billion, focused primarily on resource extraction rather than market creation.

The technology dimension is particularly concerning. China spent $444 billion on R&D in 2023, with 78% focused on manufacturing and industrial applications. India’s R&D expenditure was $66 billion, with only 34% targeting manufacturing. This gap isn’t just about current competitiveness; it’s about future technological leadership.

Supply chain control represents another strategic advantage. Chinese companies control critical nodes in global supply chains—from rare earth processing to semiconductor assembly. India’s supply chain participation remains largely peripheral, missing opportunities for value addition and strategic positioning.

A Comprehensive Reform Blueprint

Based on my analysis of successful models and India’s unique advantages, I propose a five-pillar transformation strategy:

Pillar 1: Export-Foreign Policy Integration

Every diplomatic mission should function as an export promotion hub. Our embassies in 47 countries with bilateral trade exceeding $1 billion should have dedicated commercial sections with annual export targets. Currently, only 12 missions have adequate commercial infrastructure.

Trade facilitation must become a diplomatic priority. India should negotiate dedicated export corridors with key trading partners, similar to China’s economic corridors. The proposed India-Middle East-Europe Economic Corridor should prioritize manufacturing export facilitation over general connectivity.

Strategic economic partnerships need restructuring around export complementarity. Our partnership with Japan, for instance, should focus on technology transfer for export-oriented manufacturing rather than domestic market access.

Pillar 2: Manufacturing Infrastructure Revolution

India needs 20 world-class manufacturing clusters in the next five years, each with integrated port connectivity, power supply, and digital infrastructure. Current industrial parks lack this integration, forcing manufacturers to create their own infrastructure at prohibitive costs.

Port modernization requires a $45 billion investment to match Chinese efficiency standards. This isn’t just about capacity; it’s about turnaround time, digital integration, and multimodal connectivity. Current port-to-factory connectivity adds 2-3 days to export timelines compared to Vietnamese competitors.

Digital infrastructure for manufacturing must move beyond basic connectivity to Industry 4.0 readiness. Only 12% of Indian manufacturers use advanced automation compared to 34% in China and 28% in Vietnam.

Pillar 3: Financial Architecture Redesign

Export financing needs fundamental restructuring. Current institutional lending covers only 23% of export credit needs, compared to 67% in China. We need specialized export development banks with $100 billion capitalization over five years.

Currency hedging mechanisms must evolve beyond current limited options. Vietnamese exporters access hedging products at 40% lower costs than Indian counterparts, directly impacting pricing competitiveness.

Investment promotion requires sector-specific targeting. Instead of generic FDI promotion, India needs dedicated agencies for electronics, textiles, automotive, and pharmaceuticals—sectors where we can realistically compete with China and Vietnam.

Pillar 4: Libertarian Regulatory Revolution

The current regulatory complexity creates what economists call “death by a thousand cuts,” but the solution requires embracing libertarian principles that prioritize business freedom over bureaucratic control. A smartphone manufacturer faces 67 different approvals across 14 agencies to start production, compared to 23 approvals across 6 agencies in Vietnam and just 12 in Singapore.

Presumptive Compliance Framework: Instead of seeking pre-approvals, export-oriented businesses should operate under presumptive compliance—assume businesses are compliant unless proven otherwise. This single change could reduce regulatory compliance time by 70% and eliminate opportunities for corruption in the approval process.

Single-Window Reality, Not Fiction: Real single-window systems require complete backend integration across agencies, not just common application forms. This technological integration needs a $2.8 billion investment but would save exporters $15 billion annually in compliance costs. More importantly, it should operate on risk-based assessment—low-risk activities get automatic clearance, medium-risk activities get fast-track approval, and only high-risk activities require detailed scrutiny.

Export Zone Libertarianism: Export-oriented manufacturing should operate under completely separate regulatory frameworks from domestic manufacturing. Singapore’s model demonstrates this: export manufacturers face minimal regulations, simplified labor laws, and tax incentives, while domestic manufacturers operate under standard frameworks. This isn’t about creating inequality; it’s about recognizing that export businesses face global competition and need regulatory advantages to remain viable.

Sunset Clauses for All Regulations: Every regulation affecting export businesses should have automatic sunset clauses requiring renewal every 3-5 years. This forces regulators to justify continued existence and prevents regulatory accumulation. Currently, regulations only get added, never removed, creating the 9,420 annual compliance updates that paralyze businesses.

One Nation, One Business Identity: The proposed consolidation of 23 different business identifiers into a single system represents a libertarian approach to reducing government interference. But it should go further—this single identity should provide access to all government services, eliminate renewal requirements, and operate on blockchain technology to prevent tampering and corruption.

Pillar 5: Technology and Skill Development

Manufacturing technology acquisition needs strategic focus. Current technology transfer agreements lack systematic knowledge absorption mechanisms. India should establish technology digestion centers in key manufacturing sectors, similar to China’s approach in the 1990s.

Skill development must align with export requirements rather than domestic needs. Current ITI and polytechnic curricula prepare students for local manufacturing, not global export standards. We need 500 export-oriented skill centers in the next three years.

Research and development for export competitiveness requires dedicated funding. The proposed National Manufacturing R&D Foundation should receive 1% of manufacturing exports annually—currently about $4.5 billion—to fund applied research for export enhancement.

Why Delay Is Dangerous

Global supply chains are undergoing fundamental restructuring. Companies are diversifying away from China-centric sourcing, creating a once-in-a-generation opportunity for countries like India. However, this window is narrowing rapidly.

Vietnam has already captured significant market share in textiles, electronics assembly, and furniture. Mexico is benefiting from nearshoring trends in North American markets. Bangladesh continues dominating low-cost textile manufacturing. Each day of policy delay allows competitors to strengthen their positions.

The demographic dividend argument also has a time limit. Current working-age population advantages will peak around 2035-2040. If we don’t create manufacturing jobs now, the demographic dividend becomes a demographic burden.

Technological evolution adds another urgency dimension. Manufacturing is becoming increasingly automated, potentially reducing labor cost advantages. Countries that establish manufacturing ecosystems now will benefit from technological upgrades, while late entrants may find fewer opportunities for labor-intensive manufacturing.

The Manufacturing Renaissance Imperative

India stands at a critical juncture. We can continue celebrating our digital achievements while manufacturing opportunities migrate to more decisive competitors, or we can undertake the comprehensive transformation our export potential demands.

The data is clear: manufacturing exports growth has stagnated while competitors surge ahead. The policy framework is fragmented while global supply chains seek reliable, efficient partners. The window of opportunity is narrowing while we debate incremental reforms.

This isn’t about choosing between services and manufacturing; it’s about leveraging our service sector strengths to build manufacturing competitiveness.

Our IT capabilities should power smart manufacturing, our financial sector should enable export growth, and our diplomatic networks should create market access.

The transformation I’ve outlined requires political will, financial commitment, and execution excellence.

But the cost of inaction—permanent manufacturing marginalization, employment crisis, and geopolitical irrelevance in global supply chains—far exceeds the investment required for transformation.

India’s manufacturing renaissance isn’t just an economic necessity; it’s a strategic imperative for sustained growth, employment generation, and global relevance. The question isn’t whether we can afford this transformation—it’s whether we can afford not to undertake it immediately.

The time for incremental reform has passed. India needs its manufacturing revolution now, before it’s too late to compete in the global economy of tomorrow.