A New Phase in the US-China Trade War: Beijing cuts off US firms from supplies

 

“China has escalated its economic conflict with the US. Beijing has banned the supply of certain products to selected American companies, expanded restrictions to include entities from third countries, and barred dozens of enterprises from government procurement contracts.

 

Under a decision by the Ministry of Commerce affecting ten US entities, extraterritorial restrictions have been imposed. The regulations strictly "prohibit organizations and individuals from any country or region from transferring or supplying dual-use items originating in China" to these entities. An "immediate halt" to all ongoing shipments was also ordered.

 

The list includes rare-earth metal producers MP Materials and USA Rare Earth, as well as technology companies Aveox, Red Cat, Teal Drones, and Ball Aerospace.

 

China responds to the US blacklist

 

A ministry spokesperson justified the move as a firm response to the "malicious actions of the US government in adding new entities to the so-called list of Chinese military companies."

 

Concurrently, the Ministry of Finance has excluded 46 US companies from Chinese government procurement. Under the new rules, public institutions "may not purchase products manufactured" by these companies, although the restrictions do not apply to US-owned enterprises operating within China. The list consists primarily of defense and aerospace corporations, including numerous divisions of Lockheed Martin, Raytheon Missiles & Defense, and Boeing Defense, Space & Security.

 

The latest moves by authorities in Beijing are a direct retaliation for a decision made by the US Department of Defense two weeks ago. At that time, the Pentagon expanded its blacklist to include dozens of entities accused of directly or indirectly supporting the Chinese military and operating at the heart of the US-China technological rivalry. The list included, among others, e-commerce giant Alibaba, search engine Baidu, and leading electric vehicle manufacturer BYD—a move that further deepened the crisis in economic relations between the two nations.

 

Beijing leverages its advantage in rare earth metals

 

Analysts point out that by extending its decisions to entities in third countries, Beijing is establishing so-called "long-arm jurisdiction." China is leveraging its dominance in raw materials—particularly rare earth metals and aerospace components—to block re-exports, thereby cutting off the US defense industry from supplies originating in other countries.

 

This, in turn, disrupts global supply chains and compels compliance with Chinese restrictions under the threat of losing access to key raw materials and components.”

 

This means that Lithuanian firms are stopped from selling drones and drone parts to American companies.