Title: Navigating the New Terrain of Economic Statecraft: China’s Evolving Use of Tariffs and Sanctions
In the rapidly shifting landscape of global economics, few developments have had as significant an impact as the increasing militarization of economic statecraft. Just weeks into the term of U.S. President Donald Trump in early 2017, the United States dramatically recalibrated its approach to economic relations, prominently featuring tariffs as a weapon in the ongoing trade narrative. The renewed tension between the U.S. and China is a key aspect of this narrative, defined by strategic decisions such as Trump’s increase of tariffs on Chinese imports. Such moves have sparked reactions from Beijing that highlight not only the retaliatory frameworks in play but also the evolving tools and strategies underpinning China’s economic policies.
Understanding the Retaliatory Framework
The swift retaliatory measures initiated by China juxtaposed with the tariffs imposed by the U.S. received significant media scrutiny. The Chinese government’s response regarding agricultural products was particularly highlighted, alongside provocative statements from its representatives, endorsing readiness for a prolonged struggle. This public posturing, however, obscured a more profound shift occurring within China — the strategic incorporation of economic sanctions and export controls into its trade tactics.
In response to U.S. tariffs, the Chinese government unveiled a series of measures designed to exhibit its resolve. Among these were the inclusion of ten American companies on the Unreliable Entities List (UEL) and the introduction of export controls affecting critical minerals. Notably, these responses signify a transition from mere retaliatory tariffs towards a comprehensive strategy encompassing both economic and legislative avenues, driven by the ambition to defend national interests and assert global influence.
Tools of Economic Coercion: A Closer Look
Since 2020, China’s legal architecture has expanded to include a suite of tools that mirror certain aspects of Western economic measures yet diverge fundamentally in terms of objectives and applications. While Western sanctions traditionally focus on preventing security threats and promoting human rights, China’s economic coercion tools often aim at countering perceived slights against its sovereignty or internal policies. By categorizing criticisms of its domestic actions or territorial claims as threats to its dignity, China is keen to utilize economic mechanisms to safeguard its narrative.
The Unreliable Entities List explicitly targets foreign companies that China identifies as undermining its domestic policies or halting transactions for non-commercial motives. The lack of clarity surrounding this designation opens the door to an expansive definition, allowing for a broad application that could encompass a range of entities, particularly those with ties to U.S. interests. As of early 2025, the number of companies listed continues to rise, highlighting a shift in Beijing’s calculations—using economic levers on firms that, in previous instances, might not have been viewed as directly adversarial.
Formalizing Coercive Economies: Legal Frameworks and Their Implications
China’s foray into formalized economic coercion through frameworks such as the Export Control Law and the Anti-Foreign Sanctions Law represents a significant evolution. The Export Control Law empowers Chinese authorities to impose restrictions on exports categorized as “controlled items.” In a unique twist, it facilitates retaliatory measures in response to perceived abuses against China. The Blocking Rules further strengthen this framework by prohibiting Chinese entities from complying with foreign sanctions and permitting them to seek legal redress against such measures.
These legal instruments serve not just to formalize China’s existing economic tactics but also to signal a calculated shift towards more structured responses that resonate with norms seen in the West. However, the key distinction remains: China’s tools are predominantly aimed at achieving compliance with its internal policy goals rather than the more globally minded objectives typically associated with Western sanctions.
Shifting the Balance in Economic Retaliation
The trajectory of China’s response mechanisms has evolved noticeably since late 2024, as a more aggressive posture emerges in response to tensions with the U.S. The inclusion of non-defense-related companies, such as clothing giant PVH and biotechnology firm Illumina, on the Unreliable Entities List marks a pivotal moment. By targeting companies far removed from defense interests or human rights advocacy, China underscores its growing willingness to leverage economic tools against an array of Western entities, sending a clear signal regarding potential vulnerabilities.
Moreover, recent actions against companies involved in critical supply chains illustrate an intentional strategy of asymmetric retaliation. Beijing’s targeting of firms like Skydio, especially in light of their public stances against Chinese business practices, indicates an emerging willingness to intertwine economic responses with broader geopolitical strategies.
Looking Ahead: Implications for Global Supply Chains
As the contours of economic statecraft shift moving forward, Western nations are compelled to reassess their vulnerability in the face of increasing Chinese assertiveness. The ongoing conflicts over tariffs and sanctions serve as a reminder of the interconnectedness of global supply chains and the risks inherent in overreliance on China. Strategic sectors must brace for the possibility of economic repercussions that extend far beyond the traditionally defined boundaries of military or political negotiations.
The implications extend not only to high-tech industries but also to common consumer goods, as companies explore avenues to mitigate risks associated with their operations in China. The uncertain policy environment demands a reevaluation of dependencies, with calls for diversification of supply chains surging as businesses navigate the geopolitical landscape.
Conclusion
China’s evolving tactics in economic statecraft highlight a growing sophistication in using legal and coercive measures to achieve its geopolitical ends. Western companies and governments must prepare for the complexities introduced by this new reality, where economic interactions can quickly transform into tools of coercion. As Beijing continues to test the limits of its economic strategies, a proactive approach, rooted in cooperation among Western nations, will be essential to safeguard economic interests and maintain competitive standing in a delicate and unpredictable global marketplace.