China hits back at US sanctions on tech giants, restricting its exports to American defense firms

China has announced targeted sanctions against 10 American military-related companies and prohibited government entities from purchasing products from 46 other U.S. firms. This move is a direct response to a recent U.S. Department of Defense decision to bar major Chinese technology companies, including Alibaba and Baidu, from securing U.S. defense contracts. For the defense contracting sector, these restrictions signal an escalation in trade tensions that specifically targets dual-use technologies and the supply chains of major aerospace and defense primes.

The Chinese Commerce Ministry's sanctions specifically target 10 U.S. companies by blocking the export of dual-use items, which are goods that have both military and civilian applications. The list of affected firms includes military drone manufacturers and companies involved in rare earth mining, such as MP Materials and USA Rare Earth. Other named entities include AVEOX, Red Cat Holdings, Teal Drones, IMSAR, Jaia Robotics, Ball Aerospace & Technologies, Oshkosh Defense, and L3Harris Maritime Services. This export ban also extends to third-country entities, prohibiting them from transferring Chinese dual-use items to these sanctioned American firms.

In a separate but related action, China’s Finance Ministry has prohibited government entities from purchasing products from 46 American companies. This broader list includes multiple business units of major defense contractors such as Lockheed Martin, Raytheon, and General Dynamics. While the Finance Ministry did not provide a specific reason for this prohibition, it aligns with Beijing's stated goal of safeguarding national security and responding to what it describes as the wrongful expansion of the U.S. government’s list of Chinese military companies.

These measures are a direct retaliation for the U.S. Defense Department’s recent inclusion of Chinese tech giants like Alibaba and Baidu on a list of firms allegedly linked to the Chinese military. That designation effectively prevents those companies from competing for U.S. military contracts, a move Baidu has called totally baseless. The Commerce Ministry noted that these American sanctions run counter to a consensus reached between Chinese leader Xi Jinping and U.S. President Donald Trump during a state visit in May 2026.

The new Chinese regulations also prohibit companies or individuals in third countries from transferring dual-use items from China to the sanctioned American firms. While Chinese companies can still apply for export approval for goods deemed genuinely necessary, the move is seen as a proportionate response to U.S. restrictions. Industry experts like George Chen of The Asia Group suggest that while the impact may be symbolic for firms that do not do direct business in China, it underscores the growing volatility in the global defense supply chain and rare earth availability.