Trade curbs and entity bans
China has unveiled a broad set of trade restrictions targeting the United States, focusing on drone exports and six American businesses. These actions are a direct response to recently imposed restrictions by the Trump administration and recent U.S. policies affecting Chinese technology firms, with Beijing accusing Washington of breaching previous diplomatic agreements. The new export policy for drones and related components requires individual evaluations due to their dual civilian and military applications, reflecting heightened strategic concerns.
The U.S. firms impacted by the trade prohibition include Applied DNA Sciences, a biotechnology company, and the non-profit organization Human Rights in China. Compliance Testing LLC, another affected entity, was targeted for its alleged collaboration with the FCC in actions that China claims threaten its sovereignty. These entities are now barred from all trade and cooperative activities with any Chinese counterparts, signaling a deepening of economic friction. Six of the named entities were sanctioned over their involvement in Xinjiang-related sanctions, along with Arizona-based Compliance Testing, which was blacklisted for assisting recent Federal Communications Commission measures against Chinese products. The measures mark the first time Beijing has sanctioned firms that help enforce the Uyghur Forced Labor Prevention Act.
Certification and inspection changes
China's State Administration for Market Regulation has implemented new protocols that change how CCC certifications are managed. These certifications are crucial for ensuring electronic products are safe for consumer use. Companies from the U.S. that previously conducted inspections on behalf of Chinese firms can no longer issue CCC certifications. Instead, they must now work with auditors located outside the U.S. or through non-U.S. designated certification bodies, effectively shifting the verification process. Chinese authorities also launched their first-ever national security investigation in the foreign trade sector, targeting imported printing and copying equipment installed with foreign software. The mechanism could be extended to other sectors, according to Eurasia Group, noting that if the probe leads to a software restriction, its effect would be comparable to U.S. curbs on Chinese software in connected vehicles last year.
The Chinese Commerce Ministry also announced a review of potential security risks associated with imported printing software and office equipment. While no specific companies were identified in the announcement, the move is likely seen as a further escalation in trade tensions between the two countries. These reviews are part of a broader push to scrutinize foreign products for possible threats to national interests.
Retaliation and future actions
China described its latest actions as measured, calling on the U.S. to remove its recent restrictions and stop what it views as mistaken policies. The Chinese Commerce Ministry cited the U.S. Federal Communications Commission's drone import ban and the U.S. Department of Homeland Security's decision to add 43 Chinese firms to the Uyghur Forced Labor Prevention Act. These measures have led to restrictions on the import of goods produced under conditions of forced labor, according to Chinese authorities. Beijing attributed the retaliation on Wednesday to a run of recent U.S. actions, such as FCC restrictions on Chinese imports over alleged security risks, including banning new models of drones and power routers. The ministry also noted that Washington's addition of more than 40 Chinese companies to the UFLPA entity list came just a day after the top trade negotiators from both sides had held another round of talks. The U.S. moves "seriously violate" the consensus reached by the two heads of state, it said in the statement.
The FCC previously barred the import of new Chinese drones, but later relaxed the ban to allow some models to be imported. This week, the agency extended its focus by banning the import of new foreign-made humanoid robots and power inverters, citing national security concerns. Although the U.S. regulator did not directly name China, the targeted restrictions are widely seen as affecting Chinese manufacturers and their products.
Pressure builds ahead of Xi trip The announcements underscore continued tension between Beijing and Washington before Xi’s expected trip to the U.S. in September, following Donald Trump’s state visit to Beijing in May, the first by a U.S. president in nine years.Washington last week adds 43 Chinese companies to its import blacklist over alleged links to forced labour in Xinjiang. The FCC has also restricted imports of Chinese technology over alleged security risks, including bans on new models of some drones and routers, and in June it extends an earlier telecommunications equipment ban to newer models from companies such as Huawei and Hikvision. China already has broad drone export restrictions, many introduced in 2023 after Russia’s full-scale invasion of Ukraine a year earlier. With companies such as DJI, Autel Robotics and XAG holding significant U.S. sales, any tighter controls could further complicate a global drone supply chain in which China plays a dominant role. Market sensitivity to further U.S. action remains high. Shares in Zhongji Innolight and Eoptolink fall sharply on Wednesday after a report says the U.S. could ban their equipment from its data centre, while Xi last month lays out ambitions for China to rival the U.S. in artificial intelligence and to offer training to developing countries.