China cut off dual-use exports to 10 American defense and rare earth companies on June 22, escalating a tit-for-tat exchange with Washington over military-linked firm designations.

The action followed the Pentagon’s recent expansion of its watch list of Chinese companies with alleged military ties, a list that now includes Alibaba and Baidu.

10 Companies Caught in the Crossfire

The banned firms span drones, aerospace, ground vehicles, maritime systems, and critical minerals. Drone and unmanned-systems suppliers make up the bulk of the list: AVEOX, Red Cat Holdings, Teal Drones, IMSAR, and Jaia Robotics. Meanwhile, Ball Aerospace, Oshkosh Defense, and L3Harris Maritime Services cover aerospace, armored vehicles, and naval services, respectively.

Two rare earth companies also made Beijing’s list. MP Materials operates the only active rare earth mine and processing facility in the United States. USA Rare Earth is building a domestic magnet supply chain across Colorado, Texas, and Oklahoma. Their inclusion signals Beijing’s willingness to apply pressure on America’s critical minerals supply chain.

The ministry also barred companies and individuals in third countries from transferring Chinese-origin dual-use goods to any of the 10 firms. Chinese exporters may apply for a waiver only for goods deemed “genuinely necessary.”

A Calculated Counter-Punch

Beijing framed the ban as a direct response to what it called Washington’s “wrongful expansion” of the so-called 1260H list. That Pentagon designation, updated earlier this month, added electric-vehicle maker BYD, e-commerce giant Alibaba, search and mapping company Baidu, and automaker NIO, among others.

The designation bars the Pentagon from awarding direct contracts to listed companies starting June 30.

The sanctions came a month after Trump visited Beijing for talks with Xi aimed at stabilizing relations between the world’s two largest economies. Both sides agreed to work toward reducing tariffs, but tensions have since resurfaced over technology and defense.

George Chen, partner for Greater China at The Asia Group, said the response was unsurprising and proportionate. Whether Beijing keeps its response calibrated or widens it depends on how Washington responds before the June 30 deadline.

Source: BeInCrypto