China hits back at US with sweeping trade restrictions

BEIJING/WASHINGTON: The escalating economic rivalry between the world’s two largest economies intensified on Sunday as China announced sweeping new trade restrictions targeting United States defence companies and critical mineral producers, marking a sharp retaliation in an already fragile trade relationship.

The move comes just days after the United States expanded its blacklist of Chinese firms, including major technology giants such as Alibaba Group and Baidu, accusing them of supporting activities deemed sensitive to US national security.

In response, Beijing introduced export controls affecting dozens of American-linked entities, including 10 US defence companies. The restrictions bar the export of Chinese-origin goods with potential military applications, effectively tightening the flow of dual-use technologies.

Among the most significant measures, China placed limits on two US rare earth producers, MP Materials and USA Rare Earth, both of which play key roles in supplying materials essential for advanced electronics, renewable energy systems and military hardware.

Critical Minerals at the Center of the Conflict

Rare earth elements—vital for everything from fighter jets and missile systems to electric vehicles and smartphones—have become a central battleground in the US-China economic competition. China, which dominates global processing of these minerals, is increasingly using its supply chain advantage as a strategic tool.

Beijing’s Commerce Ministry defended the measures, calling them a response to what it described as “malicious practices” by Washington. It also argued that the restrictions are necessary to safeguard China’s national security interests.

“The export of dual-use items originating in China to designated entities is strictly prohibited,” the ministry said, ordering immediate suspension of relevant trade activities.

Defence Industry Hit by Procurement Ban

In a parallel move, China’s Finance Ministry announced that 46 US companies have been excluded from government procurement contracts. The list includes major defence contractors such as Lockheed Martin and the defence division of Boeing, as well as RTX Corporation.

The decision is aimed at promoting domestic industry while reducing reliance on foreign suppliers in sensitive sectors.

A Tit-for-Tat Escalation

The latest measures follow a broader pattern of retaliation between Beijing and Washington. Earlier this month, the US Department of Defense expanded its blacklist to include two dozen Chinese companies over alleged links to military or surveillance activities.

Analysts say both sides are increasingly using economic tools as strategic weapons, blurring the line between trade policy and national security.

Limited Immediate Impact, But Rising Risks

Despite the dramatic announcements, experts suggest the immediate economic impact may be limited, given the relatively small footprint of many US firms in China’s domestic market. However, the long-term implications could be far more serious.

Trade specialists warn that the continued fragmentation of supply chains—particularly in critical minerals and defence manufacturing—could accelerate the formation of parallel economic blocs led by Washington and Beijing.

For now, both powers appear locked in a cycle of escalation, with each new restriction deepening mistrust and increasing uncertainty in global markets.

As tensions rise, industries ranging from semiconductors to clean energy are watching closely, aware that the next round of restrictions could reshape the future of global trade.