China-US Trade: Beijing targets American firms after Pentagon blacklist expansion

China-US Trade tensions escalated on Monday after Beijing announced new restrictions on dozens of American companies, responding to Washington’s decision to expand a Pentagon blacklist of Chinese firms.

China’s Ministry of Commerce added 10 US companies to its export control list, preventing them from receiving dual-use goods from China. The affected firms include rare earth producers MP Materials Corp and USA Rare Earth, along with drone manufacturers Teal Drones and Jaia Robotics.

Other companies placed under the restrictions include Aveox Inc, Ball Aerospace & Technologies Corp and Oshkosh Defense.

In a separate measure, China’s Finance Ministry barred 46 American companies from participating in government procurement projects. Most of the affected firms operate in the defence sector.

Chinese authorities clarified that foreign-funded subsidiaries operating within China would not be subject to the procurement ban.

The move followed a recent update to the US Department of Defense’s 1260H list, which identifies companies that Washington believes support China’s military. The latest additions include major Chinese corporations such as Alibaba Group, Baidu and BYD.

Analysts said Beijing’s response appears measured, noting that many of the targeted American firms have limited commercial exposure to the Chinese market.

The Pentagon’s 1260H list does not impose immediate sanctions. However, companies included on the list face restrictions on US defence contracts beginning on June 30, with additional limitations expected by 2027.

China criticised the United States for what it described as the misuse of national security concerns to justify discriminatory restrictions on Chinese businesses.

Experts said Beijing’s actions reflect an effort to protect domestic companies while avoiding a sharp escalation in tensions following recent diplomatic engagement between the two countries.

Several Chinese companies have challenged their inclusion on US blacklists through legal action. Chinese smartphone maker Xiaomi successfully secured removal from a similar US designation in 2021 after a court ruling.