Kamal Ghorui
The last meeting between US President Donald Trump and Chinese President Xi Jinping ended on a positive note. Trump had rated the summit a “12 out of 10”, and White House said China would “effectively eliminate” rare earth export controls and stop retaliatory actions against American firms.However, recent developments suggest that Beijing has altered its approach.Even though China has avoided openly criticising Trump over the Iran conflict and signalled interest in constructive engagement ahead of another proposed summit, it has moved in parallel to expand its economic leverage against Washington.
Beijing’s ‘rare’ move
A series of steps introduced since the October meeting highlight this shift. Beijing has tightened licensing rules for rare earth exports, introduced laws targeting companies relocating supply chains out of China, and blocked foreign AI chips from use in state-funded data centres. It has also prohibited Chinese firms from using certain US and Israeli cybersecurity software and is considering restricting exports of advanced solar manufacturing equipment to the United States.Analysts say that these moves go beyond routine retaliation and instead point to a broader strategy. China appears to be building a more structured set of economic pressure tools, something long associated with US policy, at a time when both sides are operating under a temporary trade truce. That agreement, due to run until November 2026, had been shaped in part by China’s earlier threat to curb rare earth exports, which quickly disrupted US auto supply chains and brought Washington to the negotiating table in Busan, South Korea.“The hope on the Chinese side is for a longer lasting, more broadly rooted truce, but it’s very much that ‘if you want peace, prepare for war’ logic,” Joe Mazur of Trivium China told Reuters.China has continued to refine its options since then. In April, Premier Li Qiang approved two new regulations giving authorities wide-ranging powers to act against foreign entities accused of discriminating against China’s industrial system or applying what Beijing calls “unjustified extraterritorial jurisdiction”. These rules allow officials to deny entry, expel individuals and seize assets where violations are found.
Rising tensions and ripple effects
The timing also reflects broader geopolitical tensions. When US Treasury Secretary Scott Bessent warned in mid-April of potential sanctions on buyers of Iranian oil, most of which is purchased by China, the response from Beijing-linked voices was swift. Yuyuan Tantian, associated with state broadcaster China Central Television, described the new framework as part of a wider set of legal countermeasures, noting: “In the past, our countermeasures were largely concentrated in the trade domain. But today’s international friction is comprehensive, and those tools are no longer sufficient.”Business groups have flagged concerns about the immediate implementation of these rules. Michael Hart of the American Chamber of Commerce in China said companies were given no chance to provide feedback. “Companies now face an asymmetry: China can reduce purchases from foreign firms with little consequence, while a foreign company that cuts its dependence on China risks investigation,” he said.At the same time, the United States has maintained its own pressure. It launched fresh trade probes in March into China’s industrial capacity and labour practices, while continuing export restrictions on semiconductors and chipmaking technology, limits that have constrained China’s ability to produce advanced chips.“It’s because of export controls that China doesn’t have access to some of the most advanced semiconductor manufacturing equipment in the world,” said Chim Lee of the Economist Intelligence Unit.This competition for leverage has spilled into commercial negotiations as well, including discussions over large aircraft purchases from Boeing. While China is seeking aircraft and spare parts, US officials have tied progress to the supply of yttrium, a rare earth element needed for jet engine production.China, for its part, has strengthened domestic requirements. Since late 2025, chipmakers have been required to source at least half of new equipment locally. At the same time, foreign AI chips are being phased out of state-backed data centres, and restrictions on overseas cybersecurity tools have been tightened, steps that encourage domestic alternatives while limiting access for US suppliers.Concerns over the broader impact are growing. The European Chamber of Commerce in China has warned that China’s evolving export control framework could “disrupt global supply chains on an unprecedented scale, leading to both economic and non-economic damage.”As Washington works to reduce its reliance on Chinese critical materials, Beijing is actively identifying new pressure points. Early discussions have already been held with solar equipment manufacturers about restricting exports of cutting-edge technology to the US.
