The High-Stakes Game of US-China Export Controls
The economic relationship between the United States and China has evolved into a sophisticated battle of restrictions, where trade policy is used as a primary tool for national security. What began as targeted tariffs has shifted into a complex web of export controls, targeting everything from high-end semiconductors to the raw minerals required to build them.
This geopolitical tug-of-war isn’t just about trade balances; it’s a race for technological supremacy. As the U.S. Attempts to limit China’s military modernization, Beijing is leveraging its dominance over the global supply chain of critical materials to create its own strategic leverage.
The US Strategy: Closing the Loopholes
The United States manages its restrictions through the Export Administration Regulations (EAR), which govern dual-use items—technologies that have both commercial and military applications. A central driver of these controls is China’s “military-civil fusion” (MCF) strategy, which the U.S. Claims blurs the line between private industry and the People’s Liberation Army.
To prevent Chinese firms from bypassing these rules, the Trump administration recently expanded restrictions to cover subsidiaries. Under a new rule, any subsidiary at least 50% owned by a firm already on the export controls list faces the same restrictions as the parent company. This move specifically targets technology giants and industry leaders, including:
- Huawei: The global telecommunications champion.
- YMTC: A major player in memory chips.
- DJI: The world’s leading drone manufacturer.
According to the U.S. Department of Commerce, this shift closes a significant loophole that previously allowed sanctioned companies to funnel restricted technologies through their smaller subsidiaries.
China’s Counter-Strike: Critical Minerals and Entity Lists
Beijing hasn’t remained passive. Its primary weapon in this conflict is its control over the raw materials essential for modern electronics and green energy. China has extended export controls beyond rare earths to include strategic minerals such as gallium, germanium, and graphite, materials that U.S. Firms locate difficult to source elsewhere.
Beyond minerals, China uses the “unreliable entity list” to penalize foreign firms. However, this tool is often used as a diplomatic bargaining chip. For example, in May 2025, the Ministry of Commerce suspended export control measures and the “unreliable” designation for multiple U.S. Entities for a period of 90 days. This included 11 firms added on April 4 and six firms added on April 9, signaling a temporary pause in hostilities to allow for domestic enterprises to resume transactions.
The 2026 Landscape: Shifting Tensions
As of early 2026, the landscape is shifting again. Recent reports indicate that the Trump administration has eased some AI chip export controls, suggesting a potential recalibration of the U.S. Approach. Simultaneously, Beijing is doubling down on its internal enforcement. Reuters reports that Chinese exporter queries to the commerce ministry have spiked following rare-earth curbs, as Beijing expands its compliance and enforcement manpower nationwide.
- US Goal: Prevent “military-civil fusion” by restricting AI, semiconductors, and robotics through the EAR and subsidiary rules.
- China’s Leverage: Dominance over strategic minerals like gallium, germanium, and graphite.
- Tactical Shifts: Use of “unreliable entity lists” as temporary diplomatic levers.
- Current Trend: A mix of U.S. Easing on AI chips and China’s increased domestic enforcement of export laws.
Frequently Asked Questions
What is “Military-Civil Fusion”?
Military-civil fusion is a Chinese national strategy designed to eliminate boundaries between academia, the private sector, and the military-industrial complex. The goal is to ensure all sectors of the economy contribute to the advancement of the People’s Liberation Army.
Which minerals are currently under Chinese export control?
China has implemented controls on several strategic minerals, most notably gallium, germanium, and graphite, which are critical for semiconductors and battery technology.
How does the 50% ownership rule work?
If a company is on the U.S. Export control list, any other company that is at least 50% owned by that parent company is automatically subject to the same restrictions, preventing the use of subsidiaries to evade sanctions.
The ongoing volatility in export controls suggests that neither power is ready to fully decouple. Instead, they are entering a phase of “managed competition,” where restrictions are tightened and loosened based on immediate political needs and supply chain vulnerabilities.
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