United States sanctions against China

Based on Wikipedia: United States sanctions against China

In October 2025, the United States Department of Defense announced that Alibaba, Baidu, and the electric car company BYD all merit inclusion on its list of Chinese military companies. These are household names—the Chinese equivalents of Amazon, Google, and Tesla. The fact that American defense officials now consider them extensions of China's military apparatus tells you everything you need to know about how dramatically the relationship between the world's two largest economies has deteriorated.

This wasn't always the case. And understanding how we got here requires going back to the very beginning.

The Deep Freeze: 1949 to 1972

When Mao Zedong's Communist forces defeated the Nationalists and established the People's Republic of China in 1949, the United States immediately extended its existing embargo against the Soviet Union to cover the new communist state. American companies couldn't sell military technology or critical infrastructure to China. Then the Korean War broke out in 1950, and things got worse. Much worse.

The trade restrictions tightened into a comprehensive blockade. For over two decades, the world's largest capitalist economy and what would become the world's most populous nation essentially refused to do business with each other.

Interestingly, according to scholar Chun Lin, this embargo backfired in at least one respect: it intensified Chinese nationalism. When you tell a billion people they can't have something, they tend to get creative—and resentful.

The thaw came in 1972. President Richard Nixon, that most improbable of diplomats, lifted the trade embargo just before China began its "reform and opening up" period. The timing wasn't coincidental. Both sides saw opportunity in rapprochement, and the next several decades would see an explosion of economic interdependence that made both nations fantastically wealthy.

Tiananmen and the Arms Embargo

Then came June 1989.

When Chinese troops opened fire on pro-democracy protesters in Tiananmen Square, killing hundreds or possibly thousands of civilians, President George H.W. Bush faced enormous pressure to respond. His administration imposed an arms embargo that remains in effect to this day.

This is worth pausing on. The Tiananmen arms embargo has now lasted over thirty-five years. It predates the internet as we know it. It predates smartphones, social media, and the entire modern tech industry. American companies can sell China virtually anything—except weapons.

For decades, this was the primary sanction. The economic relationship flourished even as the military relationship stayed frozen.

The Bureaucracy of Restriction

Before diving into the recent explosion of sanctions, it helps to understand who actually enforces all of this. Two agencies do the heavy lifting.

The Office of Foreign Assets Control, known by its acronym OFAC, sits within the Treasury Department. They maintain something called the Specially Designated Nationals and Blocked Persons List—essentially a roster of people and companies that Americans cannot do business with. Getting placed on this list is roughly equivalent to being declared a financial leper. Banks won't touch you. Suppliers won't sell to you. Your assets in the United States get frozen.

The Bureau of Industry and Security, or BIS, operates out of the Commerce Department. They maintain the Entity List, which restricts what American goods and technology can be sold to specific foreign companies. If you're a Chinese chipmaker and you land on the Entity List, American companies need special government licenses to sell you anything—licenses that are often denied.

As of July 2023, 721 Chinese businesses, organizations, and individuals sat on that Entity List. To put that in perspective: that's more entities than some countries have publicly traded companies.

Huawei: The Canary in the Coal Mine

The modern era of aggressive U.S. sanctions against China arguably began with a single company: Huawei.

In August 2018, President Trump signed the National Defense Authorization Act for Fiscal Year 2019, which banned Huawei and another Chinese telecom giant, ZTE, from selling equipment to the federal government. The stated reason was security concerns—fears that Chinese-made telecommunications infrastructure might contain backdoors allowing Beijing to spy on American communications.

But the hammer really came down on May 15, 2019. The Commerce Department added Huawei and seventy of its subsidiaries to the Entity List. The official justification was that Huawei had been caught selling goods and services to Iran without proper licenses from the Treasury Department.

The effect was immediate and devastating. American companies—including chip designers, software makers, and component suppliers—froze their business with Huawei overnight. Google stopped providing Android updates. Qualcomm stopped selling processors. Huawei, once on track to become the world's largest smartphone maker, saw its global market share collapse.

It later emerged that Huawei had also provided equipment to build North Korea's 3G network. The company denied any wrongdoing, but the damage was done.

The Uyghur Sanctions

In 2019 and 2020, the United States began imposing sanctions related to China's treatment of the Uyghurs, a predominantly Muslim ethnic minority concentrated in the Xinjiang region.

Human rights organizations and investigative journalists had documented what they described as a massive system of internment camps holding over a million Uyghurs. Reports detailed forced labor, sterilization, family separations, and systematic efforts to erase Uyghur culture and religion. The U.S. government and several others have formally labeled these actions genocide.

The Xinjiang Public Security Bureau—essentially the regional police force overseeing these operations—was added to the Entity List in 2019. The following year, OFAC imposed sanctions on the bureau under the Global Magnitsky Act, a law designed specifically to punish human rights abusers worldwide.

Hong Kong: Autonomy Lost

In 2020, Beijing imposed a sweeping national security law on Hong Kong, effectively ending the "one country, two systems" arrangement that had governed the territory since the British handover in 1997. Pro-democracy activists were arrested. Opposition newspapers were shut down. The vibrant protest movement that had filled Hong Kong's streets was crushed.

The United States responded with six rounds of sanctions between 2020 and 2025 under the Hong Kong Autonomy Act. The targets included some of the most powerful figures in Hong Kong and Chinese politics: Chief Executive Carrie Lam, her successor John Lee, and numerous other government officials and legislators.

These sanctions effectively made it impossible for the targeted individuals to use the U.S. financial system—a significant inconvenience when the dollar remains the world's reserve currency and most international transactions pass through American banks.

The Investment Ban

On November 12, 2020, President Trump signed an executive order with a remarkably straightforward title: "Addressing the Threat From Securities Investments That Finance Communist Chinese Military Companies."

For the first time, the United States was directly restricting what American investors—including ordinary people with retirement accounts—could do with their money. The order prohibited purchasing securities in companies identified by the Defense Department as "Communist Chinese military companies." Initially, forty-four companies made the list. Five were slated for delisting from the New York Stock Exchange.

This represented a fundamental shift. Previous sanctions had targeted trade—what companies could buy and sell. Now the government was reaching into Americans' investment portfolios.

The Russia Connection

When Russia invaded Ukraine in February 2022, the United States and its allies imposed unprecedented sanctions on Moscow. China officially remained neutral while continuing to trade with Russia. American officials were not pleased.

In April 2022, Treasury Secretary Janet Yellen publicly warned China that it could face consequences for not joining the sanctions regime. This was remarkable—the U.S. government was essentially threatening secondary sanctions against the world's second-largest economy for doing business with a third country.

The threats were not empty. Over the following years, the Commerce and Treasury Departments sanctioned dozens of Chinese companies for supporting Russia's military. The offenses varied: selling microelectronics used in missile guidance systems, providing satellite imagery to the Wagner Group (Russia's notorious mercenary force), supplying components for attack drones.

In one case from October 2024, two Chinese companies were sanctioned for their involvement in producing Garpiya long-range attack drones—weapons that have killed Ukrainian civilians.

By July 2023, the U.S. Office of the Director of National Intelligence published a report stating flatly that the Chinese government was helping Russia evade sanctions and providing dual-use technology—items that have both civilian and military applications.

The Semiconductor War

If there's a single industry that defines the modern U.S.-China rivalry, it's semiconductors—the microscopic chips that power everything from smartphones to missiles.

On October 7, 2022, the Bureau of Industry and Security implemented sweeping new controls on advanced computing and semiconductor manufacturing in China. The rules targeted the most sophisticated chips and the equipment needed to make them. American companies couldn't sell cutting-edge processors to Chinese customers. More importantly, companies anywhere in the world that used American technology—which includes virtually every major chipmaker—faced restrictions on what they could sell to China.

The goal was explicit: to prevent China from developing advanced artificial intelligence and supercomputing capabilities that could enhance its military power.

In the following months, more Chinese chip companies landed on the Entity List. Inspur, one of China's largest server makers. Loongson, which designs processors. Biren Technology and Moore Threads, which make graphics processing units for AI applications.

Then, in August 2023, President Biden signed an executive order going even further. The "Outbound Order" prohibited American investors from putting money into Chinese companies working on semiconductors, quantum computing, or artificial intelligence. Previous restrictions had stopped American technology from flowing to China. Now American capital couldn't flow either.

The Fentanyl Connection

While technology and military concerns dominated headlines, a quieter but deadlier issue was driving its own set of sanctions: the opioid crisis.

Fentanyl, a synthetic opioid roughly fifty times more powerful than heroin, has killed tens of thousands of Americans annually. Much of the fentanyl flooding into the United States arrives via Mexican drug cartels, but the precursor chemicals needed to manufacture it come overwhelmingly from China.

Starting in April 2023, OFAC began systematically sanctioning Chinese companies and individuals involved in the fentanyl supply chain. Some supplied precursor chemicals. Others provided manufacturing equipment. Still others helped launder money for the Sinaloa Cartel, one of Mexico's most powerful criminal organizations.

In February 2025, President Trump imposed a 10% tariff on all imports from China specifically because of fentanyl, arguing that Chinese officials had failed to crack down on the precursor chemical trade.

The Balloon Incident and Beyond

In February 2023, a Chinese surveillance balloon drifted across the continental United States before being shot down off the coast of South Carolina. The incident dominated news coverage for days and prompted the cancellation of a planned diplomatic meeting.

Over a year later, in May 2024, the Commerce Department added thirty-seven units of the China Electronics Technology Group Corporation to the Entity List for their role in the balloon program.

This pattern—an incident followed by sanctions—has repeated itself across multiple domains. Chinese companies sanctioned for supporting North Korea's missile program. A cybersecurity firm sanctioned for ransomware attacks. "Teapot" oil refineries (small, independent refineries) sanctioned for buying Iranian crude.

The Lists Keep Growing

In January 2025, the Department of Defense updated its list of Chinese military companies to include Tencent and COSCO Shipping. Tencent owns WeChat, which has over a billion users, and is one of the world's largest video game companies. COSCO is the world's fourth-largest container shipping line. These aren't obscure defense contractors—they're household names.

By October 2025, the Defense Department indicated that Alibaba, Baidu, BYD, and several semiconductor companies also warranted inclusion. The net keeps widening.

Fighting Back: Chinese Companies in Court

Not every sanctioned company has accepted its fate quietly. Some have fought back in American courts—with mixed results.

In January 2021, Xiaomi, one of the world's largest smartphone makers, sued after being designated a "Communist Chinese military company." The company argued that the designation violated its Fifth Amendment right to due process. A federal judge agreed, issuing a preliminary injunction that found the Defense Department's reasoning "unsupported" and lacking "substantial evidence." The Biden administration eventually settled, removing Xiaomi from the list in May 2021.

DJI, the dominant maker of consumer drones, tried a similar approach after being added to the military company list in October 2022. The company argued that it is "neither owned nor controlled by the Chinese military." In September 2025, however, a federal court ruled against DJI, finding that the Defense Department had substantial evidence that the company contributes to China's "defense industrial base." DJI has appealed.

The contrast is instructive. Xiaomi successfully argued it had no military connections. DJI, whose drones have been used by both Ukrainian and Russian forces in the ongoing war, had a harder case to make.

Secondary Sanctions: The Nuclear Option

In June 2025, a majority of U.S. senators supported a proposal for secondary sanctions against Russia that would impose 500% tariffs on countries that buy Russian oil, natural gas, uranium, and other exports.

China is one of Russia's largest energy customers.

If implemented, such tariffs would essentially force countries to choose between trading with Russia and trading with the United States. Given that the American economy remains far larger than Russia's, most countries would choose America. But China might not—and the resulting economic decoupling would reshape the global economy.

What It All Means

The sheer breadth of U.S. sanctions against China in 2025 would have been unimaginable even a decade ago. Technology companies, shipping conglomerates, drone manufacturers, chemical suppliers, oil refineries, balloon makers, ransomware operators—all have been targeted.

The through line connecting these disparate sanctions is a fundamental reassessment of economic interdependence. For decades, the prevailing wisdom held that trade created peace—that countries with deep economic ties wouldn't risk war because it would harm both sides. The current sanctions regime reflects a very different theory: that economic interdependence with an adversary creates vulnerabilities that outweigh the benefits.

Whether this new approach will prove wiser than the old one remains to be seen. What's clear is that the era of unfettered economic engagement between the United States and China is over. The question now is what replaces it.