US-China Sanctions: Export Controls, Entity Lists, and Retaliation

US-China sanctions now run on two parallel tracks that feed each other. Washington uses export controls, entity lists, investment bans, and human rights designations to cut Chinese firms off from American technology, capital, and markets; Beijing answers with its own export controls on dual-use goods, an “unreliable entity list,” procurement bans on US defense contractors, and a broad Anti-Foreign Sanctions Law. The pattern since 2025 has been a short truce followed by a sharper round of measures, and the most recent round came in June 2026.

The June 2026 Round

On June 8, 2026, the Department of Defense expanded its “1260H” list of designated Chinese military companies to 188 entities, adding Alibaba, Baidu, BYD, NIO, WuXi AppTec, Unitree, RoboSense, CALB Group, EVE Energy, memory chipmakers CXMT and YMTC, display manufacturers BOE Technology and Tianma Microelectronics, and solar companies JA Solar and Trina Solar, among others. CNOOC China Ltd and CNOOC International Trading were removed.¹ US law bars the Defense Department from contracting directly with listed companies, a restriction that took effect later in June 2026, and a broader ban on buying their products or services through third parties is set to begin in 2027.²

On June 22, 2026, China’s Ministry of Commerce placed ten American companies under export controls, barring supply of dual-use items — goods with both civilian and military applications — to those firms and prohibiting third-country organizations from transferring Chinese-origin dual-use items to them. Chinese exporters may apply for approval only if the goods are deemed “genuinely necessary.”³⁴ The list included defense and drone firms such as Red Cat Holdings, Teal Drones, IMSAR, Jaia Robotics, AVEOX, Ball Aerospace & Technologies, Oshkosh Defense, and L3Harris Maritime Services, alongside two rare earth producers: MP Materials and USA Rare Earth.

The rare earth inclusions were the pointed part. MP Materials operates the only active rare earth mine in the US and has received a $400 million Pentagon investment for domestic magnet production; both companies sit at the center of the Pentagon’s “mine-to-magnet” strategy for materials used in F-35s, submarines, Tomahawk missiles, and radar.⁵ Analysts called the direct impact “mostly symbolic” because both firms had already largely severed reliance on Chinese materials and equipment.⁶

Separately, China’s Finance Ministry barred 46 American companies — mostly defense contractors, including subsidiaries of Lockheed Martin, Raytheon, Boeing, General Atomics, and General Dynamics — from Chinese government procurement.⁷ Beijing’s Commerce Ministry called the Pentagon list expansion a “wrongful” act that violated the consensus reached by President Donald Trump and Xi Jinping at their May 14, 2026, summit in Beijing.³

The US Sanctions Toolkit Against China

Entity List and the Affiliates Rule

The Commerce Department’s Bureau of Industry and Security uses the Entity List to restrict exports of sensitive technology. In September 2025, BIS added 32 entities involved in military modernization, advanced computing, semiconductor manufacturing, and AI, including subsidiaries of Fudan Microelectronics, Sino IC Technology, and units of the Chinese Academy of Sciences working on space-domain and quantum research. Several received a “footnote 4 designation,” subjecting them to the foreign-produced direct product rule for high-performance computing chips.⁸

That same month, BIS issued the Affiliates Rule, extending Entity List restrictions to any entity at least 50% owned by a listed company, with “significant minority ownership” triggering mandatory additional due diligence. The rule was projected to expand the number of blacklisted Chinese entities from roughly 1,300 to more than 20,000, reaching sectors well beyond sensitive technology.⁹ Its suspension in November 2025 was a central Chinese demand in the trade deal, and its scheduled reimposition looms over late 2026.

Advanced Chip Controls

Chips are the sharpest friction point. In December 2025, Trump loosened controls to allow NVIDIA to sell its H200 chip to China — a chip roughly six times more powerful than the H20, which had been the prior ceiling.¹⁰ The Commerce Department formalized the change in January 2026, permitting export of NVIDIA H200, AMD MI325X, and equivalent chips to approved Chinese customers under performance ceilings, a volume cap set at 50% of shipments to US domestic customers, and certification requirements covering end use and know-your-customer practices.¹¹

Critics have called the framework unenforceable, noting that likely purchasers such as Alibaba, Tencent, and DeepSeek have documented ties to China’s military and security services, and that Commerce has few ways to prove a certification false. No enforcement actions related to chip diversions have been reported.¹¹ In May 2026, BIS closed a loophole by confirming that licensing requirements apply to all businesses headquartered in China or with a Chinese parent company, regardless of where subsidiaries are located. NVIDIA’s top-of-the-line Blackwell GPUs remain banned for export to China.¹⁰

OFAC Investment Restrictions

The Treasury Department’s Office of Foreign Assets Control runs a separate program restricting American investment in Chinese military-industrial firms. Originating with Executive Order 13959 in November 2020 and revised by Executive Order 14032 in June 2021, the program prohibits US persons from buying or selling publicly traded securities of entities on the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List), which started with 59 companies. The Treasury Secretary can add persons operating in China’s defense or surveillance technology sectors.¹²

Xinjiang and Forced Labor

In 2021, the US government formally determined that Beijing had committed genocide and crimes against humanity in Xinjiang since at least 2017.¹³ Under the Global Magnitsky Act and the Uyghur Human Rights Policy Act, OFAC has sanctioned senior Chinese officials including former Xinjiang party secretary Chen Quanguo, Xinjiang Production and Construction Corps party secretary Wang Junzheng, and Xinjiang Public Security Bureau director Chen Mingguo, along with the Public Security Bureau and the Production and Construction Corps themselves. Designations block US-based property and bar Americans from transacting with the sanctioned parties.¹⁴

The Uyghur Forced Labor Prevention Act, effective since June 2022, creates a rebuttable presumption that goods produced wholly or in part in Xinjiang are made with forced labor and are barred from US import. Customs and Border Protection has detained 16,755 shipments valued at roughly $3.7 billion under this authority, and the Forced Labor Enforcement Task Force has placed 144 Chinese entities on the UFLPA Entity List.¹⁵ US cotton apparel imports from China have declined, luxury vinyl flooring imports fell 48% after initial detentions, and Xinjiang’s share of global solar-grade polysilicon production dropped from 41% to 24.8%.¹⁶

Sanctions Tied to Russia, Iran, and North Korea

A growing share of US action against Chinese entities is tied to their alleged role in helping sanctioned regimes. The US-China Economic and Security Review Commission has described China as a “decisive enabler,” pointing to a “shadow fleet” of aging tankers that moves sanctioned Russian and Iranian oil to independent refineries in China’s Shandong Province, Cross-Border Interbank Payments System channels that route around the dollar, and Hong Kong intermediaries that will not enforce sanctions beyond those imposed by the UN Security Council.¹⁷¹⁸

In April 2026, OFAC designated Hengli Petrochemical, described as China’s second-largest “teapot” refinery, for buying billions of dollars’ worth of Iranian petroleum. Since February 2025, OFAC has sanctioned more than 1,000 Iran-related persons, vessels, and aircraft.¹⁹ In 2025, Chinese persons accounted for roughly 16% of all SDN designations and two-thirds of Entity List additions, making them the primary target of US economic statecraft even as the two governments negotiated a trade deal.²⁰

China’s Sanctions Toolkit Against the US

Export Controls on Dual-Use Goods

China’s Ministry of Commerce uses export controls on dual-use items — the mechanism deployed in June 2026 — as its most direct counter to US restrictions. The regime lets Beijing block sales of specific Chinese-origin goods to named US firms and also reach third-country transfers of those goods to the targeted entities. Its potency stems from China’s dominant position in critical minerals: roughly 90% of global “light rare earths” supply and over 80% of mining or refining capacity for several critical minerals used in defense and clean energy technologies.²¹

The Unreliable Entity List

China’s own blacklist targets foreign companies. In April 2025, the Ministry of Commerce added 11 US firms to the unreliable entity list for arms sales or military technology cooperation with Taiwan, including Skydio, Brinc Drones, Shield AI, Sierra Nevada Corporation, Cyberlux Corporation, Edge Autonomy Operations, Group W, and Hudson Technologies.²² The measures were suspended for 90 days starting May 14, 2025, then reinstated on August 12, 2025. Listed companies face import bans and prohibitions on doing business with Chinese counterparties.²³ In September 2025, China added Saronic Technologies, Aerkomm, and Oceaneering International on the same Taiwan grounds.²⁴

Anti-Foreign Sanctions Law

Underlying China’s countermeasures is the Anti-Foreign Sanctions Law, passed on June 10, 2021. It authorizes Beijing to sanction individuals and entities involved in drafting, deciding, or implementing foreign sanctions against China, with countermeasures including visa denials, asset freezes, and prohibitions on transactions within mainland China.²⁵ For US businesses operating in China, Article 12 creates a direct compliance conflict: it prohibits organizations and individuals, including foreign entities, from enforcing or assisting in the enforcement of foreign sanctions against Chinese interests, meaning a US company that complies with American sanctions on a Chinese entity can face litigation in Chinese courts. The law’s broad definition of “national security” — political, cultural, scientific, and economic — leaves the enforcement perimeter uncertain.²⁶

The November 2025 Trade Deal and What Was Paused

Much of the current sanctions map is shaped by a truce reached in late October and early November 2025. The US suspended the Affiliates Rule for one year, and in return China suspended export controls on rare earth elements, gallium, germanium, antimony, and graphite for US end users. Beijing also committed to removing certain US companies from the unreliable entity list and ending antitrust investigations against American semiconductor firms.²⁷ The Affiliates Rule suspension runs through November 9, 2026, and is set to be automatically reimposed unless BIS acts.²⁸

The rare earth pause has not undone the underlying dependency. US imports of Chinese rare earth magnets fell 11% in the first month of the truce, and yttrium imports stayed well below pre-restriction levels. One analysis concluded that China “is not a reliable export partner to the United States during times of heightened geopolitical tensions.”²⁹

The May 14, 2026, Trump-Xi summit in Beijing built on that deal, chartering a “US-China Board of Trade” for non-sensitive goods and a “US-China Board of Investment,” and announcing an initial Chinese purchase of 200 Boeing aircraft, at least $17 billion per year in US agricultural buys through 2028, and restored market access for US beef and poultry.³⁰ On critical minerals, the White House said China would “address US concerns”; Beijing called the result “preliminary.”³¹ Contentious questions on AI guardrails, cyber operations, export controls, and digital sovereignty went largely unresolved.³² Five weeks later, the Pentagon’s 1260H expansion and China’s June 22 response tore into the truce.

What Tariffs Are Not Doing

Tariffs are often lumped in with sanctions, but the two operate under different authorities and are worth separating. On February 20, 2026, the Supreme Court ruled in Learning Resources, Inc. v. Trump (No. 24-1287), 6-3, that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. IEEPA’s grant of authority to “regulate importation” does not encompass the power to tax, and the president lacks inherent authority to impose tariffs during peacetime.³³ The ruling did not address whether the federal government must refund tariffs already paid, estimated at more than $200 billion in 2025, and it did not touch OFAC designations or Commerce Department export controls, which are the machinery running the sanctions regime described above.

What the Sanctions Have Actually Done

Research on the economic effects points in more than one direction. A 2024-2025 study found that Chinese companies directly affected by US export controls increased R&D spending by 49% and boosted patent output by 41% compared with firms buying allowed items, while Chinese upstream suppliers of goods similar to restricted items increased patenting in controlled technologies by 361%. The researchers concluded that export controls cut off imports in the short term but “backfired” over time by driving China to develop domestic substitutes.³⁴ China-Russia bilateral trade has increased 66.7% since 2021.¹⁸

On the US side, sanctions have produced deadweight losses as businesses and consumers face higher costs for Chinese imports and their substitutes, and Hong Kong’s role as a trade intermediary has been significantly disrupted. Academic analysis describes the arrangement as economic pain for both nations, with the impact on China as the target “largely weakened” over time as Beijing adapts.³⁵

Allies are moving to reduce exposure. At the June 2026 G7 summit in France, member nations pledged that no more than 60% of any single rare earth supplier’s share of imports should stand by 2030, with an eventual target of 50%.⁵ Whether that timeline holds depends on how the next round of measures lands — and on whether the Affiliates Rule snaps back into force in November.

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