What China’s New Export Controls Mean for the U.S. Defense Industry—and How the Impact Could Escalate

Just a day after the commencement of the new year, China signalled its intent to continue striking back at the U.S. for the severe trade restrictions the country has imposed on China over the past two years. On January 2, the Ministry of Commerce (MOFCOM) announced that 28 American companies had been added to China’s dual-use export control list, a sanctions list that was introduced in late 2024. All Chinese companies are now prohibited from exporting any “dual-use” items to any of the 28 firms on the export control list. Dual-use items are goods that can be used for both civilian and military purposes. The U.S. Bureau of Industry and Security (BIS) defines them as items with “civil applications as well as terrorism and military or weapons of mass destruction (WMD)-related applications.” Companies seeking special exemptions from these newly established sanctions may apply for a dual-use export license through MOFCOM. 

Who Was Added to the Export Control List?

A total of 28 U.S. firms were added to the PRC’s dual-use export control list on January 2. The vast majority of the companies sanctioned by China are defense contractors and weapons manufacturers. The list includes:

• General Dynamics
• Lockheed Martin Corporation
• Lockheed Martin Missiles and Fire Control
• Lockheed Martin Aeronautics
• Lockheed Martin Missile System Integration Lab
• Lockheed Martin Advanced Technology Laboratories
• Lockheed Martin Ventures
• L3 Harris Technologies
• Intelligent Epitaxy Technology (IntelliEPI)
• Clear Align LLC
• Boeing Defense, Space & Security
• Raytheon Missiles & Defense
• Raytheon/Lockheed Martin Javelin Joint Venture
• Raytheon Missile Systems
• General Dynamics Ordnance and Tactical Systems
• General Dynamics Information Technology
• General Dynamics Mission Systems
• Inter-Coastal Electronics
• System Studies & Simulation
• IronMountain Solutions
• Applied Technologies Group
• Axient
• Anduril Industries
• Maritime Tactical Systems
• Pacific Rim Defense
• AEVEX Aerospace
• LKD Aerospace
• Summit Technologies Inc.

Why Are These Companies Being Targeted Specifically?

Officially, the Chinese Communist Party (CCP) added the 28 U.S. companies to its export control list in order to “safeguard national security and interests.” In an interview with Global Times, Lü Xiang, a research fellow at the Chinese Academy of Social Sciences, echoed this stance. “It is imperative for China to take actions against these entities to safeguard China’s sovereignty, security and development interests,” he told the outlet. 

Last month, however, an announcement from a spokesperson from the Chinese Foreign Ministry suggested another reason for such punitive measures against defense-focused U.S. manufacturers. “To aid ‘Taiwan independence’ by arming Taiwan is just like playing with fire, and to use the Taiwan question to contain China is doomed to fail,” the spokesperson said. In other words, any companies selling weapons to Taiwan are standing in the way of China’s core geopolitical objectives, and the CCP feels compelled to retaliate against them. 

The U.S. defense companies see the sanctions in a similar light. According to a conversation with an industry insider, putting these firms on the dual-use export control list is a way to punish them for arming Taiwan, and any talk about national security is a thinly veiled allusion to these corporations’ transactions with the Taiwanese government. According to Forum on the Arms Trade, a network of experts who track weapons sales and arms transfers between nations, the U.S. government was notified of well over two billion in arms sales to Taiwan in 2024. These included national advanced surface-to-air missile systems (NASAMS), radar systems, and gun mounts for battleships. 

A Symbolic Move With Minimal Impact

Despite the confrontational nature of these new export controls, industry experts don’t expect them to have much, if any, tangible impact on the 28 sanctioned firms. U.S. defense companies generally don’t procure products directly from America’s chief adversaries—especially dual-use items—and so the ban won’t meaningfully impact sourcing and supply chains. 

The sanctions are so toothless, in fact, that they’ve barely made waves within the U.S. defense industry. There’s been minimal discussions surrounding the ban among defense professionals, and top contractors are significantly more focused on a bevy of other impending challenges. Ultimately, these controls are being understood as a symbolic move, rather than one with palpable, difference-making force behind them. Instead, it serves as another example of China’s willingness to continue retaliating against U.S. sanctions and perpetuating the trade war. 

How China Could Hurt U.S. Defense Contractors 

While the latest trade restrictions may not have left much of an imprint, there are still a few ways that the CCP could deal serious blows to U.S. defense firms and their ability to source parts and materials. While the latest export ban specifically focused on dual-use items, if China were to broaden export controls to, say, semiconductors, companies like Lockheed Martin, General Dynamics, and Raytheon could face major disruptions. 

According to research conducted by data analytics firm Govini and released last year, Chinese manufacturers have penetrated the U.S. defense supply chain to a staggering degree. Over the past two decades, the number of Chinese supplies embedded in the U.S. defense industry’s supply chains have increased fourfold. Equally disquieting, over 40 percent of the semiconductors that are used in the U.S. Department of Defense’s weapons and weapon systems are sourced from China. 

This substantial degree of dependence is undoubtedly not lost on China. If the CCP wanted to legitimately hobble the contractors that provide the Department of Defense with much of its technology, arms, and military infrastructure, it could impose trade controls on its chips. This potential measure, according to at least one industry professional, would effectively sabotage U.S. defense manufacturing, forcing companies to completely rebuild their sourcing and supply chains on the fly. For now, though, nobody is treating this as a truly plausible scenario—primarily because of the immediate negative impacts that would reverberate through the Chinese economy. According to some estimates, the electronics sector contributes as much as 25% to China’s total GDP, and restricting its exports in any way could be highly detrimental to a national economy that’s been stagnating for several years now. 

The mere existence of this possibility, though—however remote—speaks to just how many levers China has at its disposal in this increasingly fierce, protracted trade conflict with the U.S. 

The Tit-for-Tat Escalation Is Far From Over 

In the 10 days since China’s new export controls were announced, there was yet another significant development in the dispute. The Biden administration laid out plans to restrict the export of AI chips and the U.S. technology needed to manufacture them to a slew of American adversaries, including China. It appears as though the intensity of these trade wars—and the frequency of hostile measures and countermeasures—is ratcheting higher and higher. The CCP, meanwhile, is almost certainly strategizing ways to continue striking back at the country that has become its ruthless scourge over the past half-decade. 

Manufacturers and other businesses that want to be able to respond with speed and agility to this dynamic trade compliance landscape can take advantage of the data and functionalities of supply chain risk management platform Z2Data. The SCRM tool can help companies see deep into their supply chains, identifying key manufacturing sites and understanding country dependencies affected by sanctions, tariffs, and other trade restrictions. In addition, Z2Data maintains a sanctions watchlist that uses comprehensive data and high-credibility sources to single out suppliers at the highest risk of becoming the target of new sanctions in the future. 

To learn more about Z2Data and the array of tools it offers businesses to help them see how trade compliance issues affect their supply chains, schedule a free demo with one of our product experts.

Just a day after the commencement of the new year, China signalled its intent to continue striking back at the U.S. for the severe trade restrictions the country has imposed on China over the past two years. On January 2, the Ministry of Commerce (MOFCOM) announced that 28 American companies had been added to China’s dual-use export control list, a sanctions list that was introduced in late 2024. All Chinese companies are now prohibited from exporting any “dual-use” items to any of the 28 firms on the export control list. Dual-use items are goods that can be used for both civilian and military purposes. The U.S. Bureau of Industry and Security (BIS) defines them as items with “civil applications as well as terrorism and military or weapons of mass destruction (WMD)-related applications.” Companies seeking special exemptions from these newly established sanctions may apply for a dual-use export license through MOFCOM.