Beijing targets US defense and rare earth firms with new restrictions

Beijing just announced new restrictions on a long list of US defense, tech, and rare earth firms.

The measures dropped within minutes of each other on June 22:

• The commerce ministry (MofCom) added 10 US firms to its export control list, barring Chinese companies from supplying them with dual-use goods.
• The finance ministry (MoF) banned Chinese government procurement entities from buying products from 46 US companies.

At issue: This is Beijing's tit-for-tat response to the Pentagon's sweeping expansion of its Section 1260H list of Chinese military companies earlier in June (Global Times).

What caught our eye: MofCom's list includes MP Materials and USA Rare Earths – Washington's would-be national champions for breaking China's grip on rare earth magnet supply chains.

• We doubt either firm relies on Chinese inputs, so the practical impact is limited.
• Still, the signal matters – Beijing is treating them as defense-linked strategic players, not normal mining companies.

That's not all: The rest of MofCom's list is filled with US aerial and marine drone-makers and component suppliers. These firms are already under pressure to re-shore supply chains, but some may still feel the bite of controls.

MoF's list is mostly the usual suspects: Lockheed Martin, Raytheon, Boeing Defense, and other defense tech firms are already subject to Chinese sanctions and US restrictions selling to China – they won't be losing business.

• Still, MoF included a carve out, indicating Chinese subsidiaries of the listed companies could still participate in procurement.

Get smart: Despite the relative calm in the US-China relationship, Beijing's trade war playbook – matching every action with an equal and opposite retaliation – is still very much in effect.