Tensions between China and the United States have escalated once again as Beijing announced a series of trade controls targeting dozens of major U.S. companies. This move comes just weeks before President-elect Donald Trump takes office, signaling that economic clashes between the two superpowers are far from over. The Ministry of Commerce in China justified the measures as necessary to “safeguard national security and interests,” a phrase that underscores the geopolitical weight behind these decisions.
What Are Trade Controls?
Trade controls refer to government-imposed restrictions on imports, exports, and international business activities, often justified by national security concerns. In this case, China’s Ministry of Commerce added 28 U.S. companies to its export control list, banning the export of ‘dual-use’ items—products with both civilian and military applications—to these firms. Additionally, 10 companies were placed on China’s “unreliable entities list,” prohibiting them from doing business in China and barring their executives from entering or residing in the country.
The concept of “dual-use” goods is particularly significant because it blurs the line between civilian and military technologies. As Jesse Schreger, an associate professor of Macroeconomics at Columbia Business School, explained, “The threat to not sell dual-use goods to listed companies could be consequential, given China’s role as the world’s manufacturing powerhouse.” However, Schreger also pointed out that the lack of clarity on what qualifies as dual-use leaves significant room for interpretation.
Who Is Affected?
The affected companies include U.S. defense giants such as Raytheon, Boeing Defense, and Lockheed Martin. These firms are known for manufacturing military equipment and defense systems, but they also have civilian operations. For example, Boeing’s commercial aviation division could face a more tangible impact than its defense wing.
Experts suggest that while these sanctions appear significant, their immediate economic impact will be limited because many of these companies already face restrictions on operating in China. Andrew Gilholm, a China expert at consulting firm Control Risks, noted, “Most of this is probably at the symbolic level because so many of these entities were already subject to sanctions. But what we’re seeing is the widening scope and number of entities being added in a single listing.”
Michael Hart, president of the American Chamber of Commerce in China, added that Chinese authorities have historically been cautious about actions that could hurt companies contributing to their own economy. “Normally the actions China takes do not impact companies who are benefiting China’s economy,” he explained.
Why Is China Doing This?
China’s actions are widely seen as both retaliatory and symbolic. With Donald Trump preparing to re-enter office, his administration is expected to introduce steep tariffs and further sanctions against China. Experts argue that Beijing is sending a warning: any aggressive U.S. trade measures will be met with equal force.
Additionally, China has long opposed U.S. arms sales to Taiwan, which it views as part of its territory. By targeting defense contractors, Beijing is emphasizing its disapproval of U.S. military support for Taiwan. As Schreger observed, “It really does seem to be a warning shot — that escalation in U.S. policies against China, particularly under Trump, will be met with a more aggressive response.”
China has been laying the groundwork for these measures for some time, creating blacklists and legal structures to mirror Washington’s tactics. William Alan Reinsch, a senior adviser for the Economics Program at the Center for Strategic and International Studies, described the situation as “preemptive retaliation,” explaining, “They’ve gradually been tightening the screws… reminding the American government that they’re integrated into our supply chains, and they can cause us a lot of difficulty if they want to.”
How Will This Affect U.S. Companies?
For defense contractors like Raytheon and Lockheed Martin, the direct economic impact might be minimal since they do not heavily rely on Chinese markets. However, Boeing, which operates both military and civilian divisions, could feel more significant strain, particularly in its commercial aviation sector.
The threat isn’t just about current business but also about long-term uncertainties. Jesse Schreger noted, “Unclear is how China intends to enforce the measures and which products will be viewed as dual use and therefore have their sales restricted. Tires, for instance, could be viewed as produced for both civilian and military use.”
More broadly, these sanctions add uncertainty to an already strained U.S.-China relationship, potentially disrupting supply chains and increasing costs for American businesses operating globally. Companies that depend on critical Chinese exports, from rare minerals to advanced electronics, could find themselves caught in the crossfire.
What Does This Mean for U.S.-China Relations?
This latest move is part of an ongoing economic tit-for-tat that began during Trump’s first term and continued under the Biden administration. While the initial measures were largely symbolic, the frequency and scale of these sanctions have increased, reflecting a more assertive stance from Beijing.
Experts predict that China will continue to use trade restrictions as both a bargaining tool and a warning signal to Washington. The relationship between the two nations, already fraught with distrust, seems poised for further turbulence.
Nathan Picarsic, a senior fellow at the Foundation for Defense of Democracies, commented, “They like to draw attention to tying to add costs anytime we’re engaged with Taiwan, but in terms of broader macroeconomy, these are relatively safe targets for them to take swipes at.”
As Donald Trump prepares to take office, the global business community will closely watch how his administration responds. Will Trump escalate tariffs, or will he use them as leverage in negotiations? One thing is clear: the trade standoff between the U.S. and China is far from over, and its consequences will reverberate across global markets for years to come.
For now, businesses on both sides of the Pacific must brace for heightened uncertainty and potential economic fallout as the world’s two largest economies remain locked in a high-stakes standoff. As Andrew Gilholm aptly summarized, “The drumbeat of these things is going to be more frequent.”
