China has introduced sweeping new trade regulations this month that have sparked concern among American companies and trade experts, who warn these measures could significantly hamper U.S. efforts to decrease supply chain reliance on China.
The Trump administration’s response has been notably restrained, with U.S. officials avoiding public commentary on China’s latest move.
These regulations, unveiled just weeks before President Donald Trump’s scheduled May 14-15 meeting with Chinese President Xi Jinping, establish a legal framework for penalizing international companies that attempt to diversify their sourcing away from China.
The Trump administration has consistently encouraged American businesses to “derisk” by reducing their dependence on Chinese goods and regaining “sovereignty” in critical sectors such as essential minerals and pharmaceuticals. China’s new policies effectively pressure U.S. and other international companies in the opposite direction.
A U.S. official, speaking anonymously to Reuters, suggested that China’s timing in releasing these regulations before Trump’s visit to China indicates Beijing is gauging the White House’s commitment to maintaining the current pause in trade hostilities, which began early last year with U.S. tariff increases and Chinese counter-measures.
“It’s a clear attempt to stop derisking,” the official said.
Industry organizations have raised serious concerns about these Chinese regulations. The American Chamber of Commerce in China informed Reuters that China could reduce purchases from international companies with minimal repercussions, while foreign businesses might face scrutiny from Chinese officials for decreasing their dependence.
“Washington’s response so far has been silence. That risks signaling weakness,” said Craig Singleton, a China expert at the Foundation for Defense of Democracies (FDD) think tank.
With the summit drawing near, the administration seemed intent on avoiding public escalation, he noted.
White House spokesman Kush Desai avoided directly addressing Reuters’ inquiries about the measures, saying only that the Trump administration “will continue to leverage every bit of America’s economic might to safeguard our national and economic security.”
The Treasury Department and the Office of the U.S. Trade Representative did not provide responses to Reuters’ requests for comment.
The Trump administration’s restraint regarding these new regulations, which many in American industry view as a warning shot, marks a shift from the trade confrontation that preceded Trump’s October meeting with Xi in South Korea.
In Busan, both nations eventually established an unstable trade cease-fire, though Trump had previously threatened to halt all U.S. software exports to China and impose 100% tariffs on Chinese products in response to Chinese restrictions on critical mineral exports.
China’s new policies specify that foreign entities taking actions “such as suspending normal transactions with our nation’s citizens or organizations,” face investigation and penalties.
While the regulations don’t specify particular industries for enforcement, they indicate Chinese agencies will create a “key sectors list” to protect “circulation of raw materials, technology, equipment” and other goods.
These measures could impact numerous companies across various sectors.
American pharmaceutical companies, for instance, have increasingly sought to relocate some manufacturing and sourcing to India and other nations with less geopolitical tension with Washington.
Under China’s new framework, such moves could be viewed as threats to China’s security, potentially resulting in companies facing investment restrictions, import or export prohibitions, and staff being barred from entering the country.
A second round of Chinese regulations released shortly afterward outlines penalties for foreign companies that comply with “unjustified extraterritorial jurisdiction,” Beijing’s description of U.S. sanctions and export restrictions.
Analysts and some U.S. officials express concern about the precedent established by Beijing’s measures.
“Left unaddressed, these new rules will normalize supply chain coercion and accelerate China’s development of other economic weapons to lock in corporate dependence and prevent supply chain shifts out of China,” FDD’s Singleton said.
Two U.S. industry sources informed Reuters that the Trump administration had received briefings from industry groups about the regulations and the new leverage they provide China.
The U.S. officials had been in “listening mode,” but provided no definitive position or objection, according to the sources, who requested anonymity to speak freely about their administration discussions.
“It’s almost like loading the gun without actually firing it,” one industry source described the Chinese rules, adding they believed it was improbable the U.S. would respond before the summit given the administration’s focus on “preserving strategic stability.”
Another U.S. business source noted that recognizing China’s new supply chain regulations would force the Trump administration to retaliate despite limited desire for escalation.
Reva Goujon, geopolitical strategist and director at Rhodium Group, said the measures are so comprehensive that U.S. negotiators could charge Beijing with “violating the spirit of Busan and basically the whole idea of trade and investment reciprocity.”
“China is clearly in a much more emboldened position,” Goujon said.
