In a significant shift in its trade strategy, China has initiated a series of laws and policies aimed at countering new trade conflicts, drawing inspiration from the methods previously employed by the United States. This development, which began in 2018, marks a pivotal moment as Beijing seeks to navigate its complex relationship with Washington amidst rising tensions. The new measures not only reflect China’s desire to protect its economic interests but highlight its ambition to exert greater control over the global technology supply chain.
China’s answer to these growing trade skirmishes has been the enactment of new, more far-reaching export controls and reviews of foreign investment. This high-stakes gamble gives Beijing considerable flexibility to maximize its growing power in the global economic commons. In retaliation, as recently as March, China added ten U.S. companies to its “unreliable entity list.” This action bars these companies from participating in import or export activities involving China and prevents them from making any further investments in the country.
In April, China’s retaliatory trade measures increased again—this time, by adding 15 U.S. firms to its own export control list. General Dynamics Land Systems and General Atomics Aeronautical Systems are significant players. They’re especially dominant in the defense and technology sectors. China retaliated with 125% tariffs, just like the tariffs that were first placed on these earlier by the Trump administration. The blacklisting of even more U.S. companies during this period further highlights China’s bad faith in the trade war that we’re currently fighting.
China’s recently announced export controls apply to rare earth minerals, one of the key inputs in producing nearly all advanced technologies. In April, the Chinese government dropped a bombshell. They announced that foreign companies need to apply for permission to export magnets that include rare earth elements made from Chinese materials. This action places China in a position to wield tremendous power over sectors that depend on these valuable materials. China has already placed export controls on tungsten, tellurium, bismuth, molybdenum, and indium. This action is a clear indication of their wish to monopolize industries that are key to the production of advanced technology goods.
These measures are especially significant, with major implications. China’s tools give it power to access or deny access to critical technology globally. The implementation of a foreign direct product rule, which echoes a long-standing U.S. policy, indicates Beijing’s commitment to influencing international trade dynamics. The practical effect of this rule is protectionism for products made in China. It extends to goods manufactured abroad that incorporate technology created in China.
By all available signs, China is intent on keeping foreign actors out on the shortcuts they take onto its technological highway. Its restrictions on some U.S. technologies made abroad exemplify this commitment. In so doing, Beijing seeks to safeguard its own strategic interests and minimize damage from emerging threats posed by U.S. competition.
As Li Qingming, a spokesperson for the Chinese government, has stated, these new policy directions are deliberate.
“We have combed through relevant foreign legislation and taken into consideration the international law and the basic principles of international relations.” – Li Qingming
If anything, China is in the process of doubling down on its industrial trade strategies. Yet in doing so, it is simply returning fire and taking a play straight out of the U.S. playbook to protect its own economic sovereignty.
