The renewed tit-for-tat between Beijing and Washington reveals an apparent shift in China's approach to economic statecraft. Beyond merely countering President Trump's trade threats, Chinese leaders are orchestrating a strategy that will compel the country to hasten supply-chain security and diversification of markets beyond US control. The Chinese government appears increasingly willing to accept short-term economic pain for what it sees as long-term national security.
The renewed tit-for-tat between Beijing and Washington reveals an apparent shift in China's approach to economic statecraft that few have fully appreciated. Beyond merely countering President Trump's trade threats, Chinese leaders are orchestrating a strategy that will compel the country to hasten supply-chain security and diversification of markets beyond US control.Beijing's rare earth controls and defiant rhetoric should be viewed not as impulsive retaliation but as part of a deliberate decoupling acceleration. Chinese policymakers likely have concluded that economic interdependence with the US represents a structural vulnerability rather than an asset. Chinese President Xi Jinping's willingness to implement these measures during a politically sensitive period speaks volumes about their strategic importance.
Next week's Fourth Plenum coincides with this economic realignment. From Oct. 20-23, the Communist Party's Central Committee — about 370 members strong — will gather for their first plenary session since July 2024. Reignited Sino-US tensions now provide immediate context for discussions that will shape China's trajectory through 2030, likely strengthening the case for technological self-sufficiency and industrial advancement in its closely watched next five-year plan.
What's particularly notable is the narrative by China’s Ministry of Commerce, or Mofcom, around its new export controls. By emphasizing that civilian applications "need not worry," Beijing is signaling to third countries and multinational corporations that China remains open for business, just not necessarily with America. This bifurcated approach attempts to isolate Washington while preserving China's global economic relationships.
Evidence of this strategy is already visible in Europe. German automakers BMW and Volkswagen have secured rare earth supply permits since April, ensuring electric vehicle production continues seamlessly within China and across Europe, according to the China Chamber of Commerce to the EU.
“China-EU cooperation is flourishing, and EU companies need not be overly concerned about the impact of China's rare earth export controls on their operations,” the Chamber said in a statement posted on its official WeChat account late last week.
Having said that, Beijing's pivot carries risks. Hastening decoupling threatens to erode market confidence while potentially triggering coordinated Western responses that extend beyond Washington. The Dutch government reportedly ordered Nexperia, a Netherlands-based chipmaker with Chinese ownership, to freeze operations after the US blacklisted its parent Wingtech Technology in late 2024.
Economic planners must thread the needle between managing external trade relationships and advancing longer-term development goals — all while property market adjustments persist and domestic consumption data remains uneven.
The latest trade figures highlight how these pressures are compounding. China’s overall imports and exports rose 6 percent in the third quarter, while trade with the US fell sharply in September, dropping 15.6 percent year on year to $45.79 billion, according to data released Monday by the General Administration of Customs (see here).
— Tit for tat —
Just a day after China's National Day celebrations concluded, Beijing unleashed last Thursday a barrage of export control measures that revealed the coordinated nature of its offensive. Mofcom unveiled six new restrictions in rapid succession, tightening the flow of critical materials to foreign markets.
These controls extend well beyond Beijing's established rare earth restrictions, now encompassing superhard materials essential for advanced manufacturing and lithium batteries, which are key components in the global green transition (see here and here).
The ministry explicitly linked these actions to US trade policies that have "seriously harmed China's interests." Since the bilateral dialogue in Madrid last month, Washington has expanded its entity list, implemented what Beijing terms "piercing" rules to widen enforcement scope, and advanced new Section 301 measures targeting Chinese maritime, logistics and shipbuilding sectors.
Mofcom accused the US of "overstretching" national security concepts while implementing discriminatory controls. It noted that US control lists now cover more than 3,000 items, compared with roughly 900 under China's system — a comparison clearly intended to position Beijing as the more restrained actor.
Beijing’s new rules are reciprocal yet assertive. Export controls now extend to foreign entities handling Chinese-origin materials through dual-use license requirements, while enforcement reaches subsidiaries and affiliates where listed entities hold 50 percent or greater stakes (see here and here).
In a move signaling Beijing's growing technological sensitivities, Canadian semiconductor research firm TechInsights found itself added to China's "unreliable entity" list after publishing analysis of Huawei's closely guarded chip designs. Thirteen military-related companies received similar designations (see here).
The tit-for-tat escalation continued with China's Ministry of Transport announcing on Friday "special port fees" on US-owned or operated vessels starting Tuesday, precisely when Washington's Section 301 tariffs on Chinese vessels take effect (see here).
Washington's response proved equally swift. A day after Beijing’s actions, Trump declared new 100 percent tariffs on Chinese goods "over and above" existing duties that would begin Nov. 1, framing them as retaliation for China's export curbs on rare earths (see here). He further promised export controls on “any and all critical software.”
The US Trade Representative's office subsequently increased port fees on foreign-built ships set to take effect Tuesday (see here).
— Qualcomm probe —
China’s antitrust investigation into Qualcomm's acquisition of Israeli chipmaker Autotalks represents Beijing's latest salvo against US business interests (see here).
While China’s State Administration for Market Regulation, or SAMR, framed the case as routine enforcement, the timing — just a day after Beijing unveiled new export controls on rare earths — has prompted speculation that the probe serves part of the calibrated response to mounting US restrictions on Chinese firms.
“This is an obvious countermeasure,” a Beijing-based trade and antitrust lawyer said, noting that the unusually public treatment of the Qualcomm case appears engineered to serve both legal and strategic functions. As Washington expands trade restrictions and regulatory pressures on Chinese firms, Beijing seems increasingly prepared to respond in kind.
SAMR said Sunday that Qualcomm completed its Autotalks purchase in June 2025 without notifying or contacting the agency, with relevant facts already acknowledged by the US chipmaker (see here).
The agency said it had explicitly ordered Qualcomm to file in March 2024. At that time, Qualcomm indicated that it would abandon the transaction — only to proceed more than a year later without a word to the Chinese authority.
The unusually detailed narrative in SAMR’s Sunday note appears aimed at underscoring the seriousness of Qualcomm’s conduct, including how it “intentionally sought to sidestep regulatory oversight,” the lawyer said. Unlike typical notification failures where enforcement procedure could be opaque, SAMR took the rare step of publicly laying out a full timeline of events two days after its initial brief announcement of the formal probe.
Unlike some below-threshold transactions where companies might plausibly plead ignorance, SAMR had already evaluated the Autotalks deal, identified potential anticompetitive effects and mandated notification — yet Qualcomm proceeded regardless, without clearance or engagement.
This characterisation could carry major consequences under China’s evolving merger-control regime. Qualcomm’s case could fall into a category where SAMR can impose harsher penalties — not just a fine of up to 5 million yuan for a typical “gun-jumping” violation, but potentially up to 10 percent of its turnover if the deal is found to have actual or potential anticompetitive effects. Moreover, under the revised 2022 Antimonopoly Law, violations involving particularly serious circumstances can incur fines up to five times the initial penalty.
In March, SAMR introduced detailed penalty benchmarks for lower-risk cases, including clear starting points and adjustment factors (see here). But for higher-risk deals, SAMR said it would apply only a “principles-based approach,” citing limited enforcement experience. That makes Qualcomm’s case a potential test candidate for how China will wield its expanded powers under the revised law, and a warning shot for dealmakers that ignore regulatory instructions.
— Long game —
As reported, as Beijing and Washington prepared to kick off their first trade dialogue in May, China has already positioned itself for a protracted standoff rather than quick concessions to solve the dispute (see here).
The bilateral negotiations themselves serve distinct purposes for each side. For Beijing, they function as sophisticated stress tests — opportunities to gauge how much economic separation Chinese society can absorb without threatening stability. Washington, meanwhile, gains valuable time to reconfigure supply chains away from Chinese dependence.
Neither side harbours illusions about these talks fundamentally altering their respective goals. Chinese policymakers are systematically evaluating when ongoing economic decoupling from the US might pose manageable domestic risks. Once they reach that determination, the diplomatic process could become expendable.
— Analysis by Yonnex Li, Emily Liu and Yang Yue.
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