WASHINGTON, D.C.: The Trump administration has escalated its clampdown on Chinese technology firms, expanding export restrictions to include subsidiaries of companies already blacklisted by the U.S. Department of Commerce. The move is aimed at closing a long-criticized loophole that allowed sanctioned firms to bypass restrictions through affiliated entities.
Effective immediately, the updated rule targets subsidiaries that are at least 50% owned by companies on the Commerce Department’s Entity List, such as Huawei, memory chipmaker YMTC, and drone manufacturer DJI. The Commerce Department said the change could impact tens of thousands of entities globally and is designed to block efforts to reroute sensitive U.S. technologies through indirect channels.
“This action closes a significant loophole that has enabled exports undermining American national security and foreign policy interests,” said Jeffrey I. Kessler, Under Secretary for Industry and Security.
What’s Covered Under the New Rules?
The broadened restrictions apply to critical technologies, including:
Artificial Intelligence
Semiconductors
Advanced Robotics
Manufacturing Equipment
And items subject to the “Military End-User List” intended to prevent use in military applications
Although the new policy does not explicitly name China, the overwhelming presence of Chinese and Russian companies on the Entity List signals the primary targets. Many of these firms have been cited for their roles in military technology development or violations of U.S. national security protocols.
China Reacts: “Extremely Malicious”
Beijing reacted swiftly and sharply. China’s Ministry of Commerce called the move “extremely malicious” and accused Washington of “unreasonable suppression” of Chinese businesses.
“We urge the U.S. to immediately correct its wrongdoing and stop this unfair treatment of Chinese companies,” a ministry spokesperson said, warning that China would “take necessary measures” in response.
Strategic Timing Amid High-Level Diplomatic Stakes
The announcement comes just weeks ahead of a possible meeting between President Donald Trump and Chinese President Xi Jinping at the upcoming APEC Summit in South Korea, adding a new layer of tension to already fragile U.S.-China trade relations.
The U.S. has so far blacklisted over 1,000 Chinese firms, requiring them to obtain special licenses to access U.S.-made technologies. The expanded rule reflects growing concerns in Washington that some companies are evading restrictions by restructuring or spinning off business units.
A 2023 House Foreign Affairs Committee report had previously criticized the Entity List as “ineffective,” citing the example of Huawei’s 2020 sale of its smartphone brand Honor to a Chinese state-backed consortium. Despite its ties, Honor was not blacklisted, raising concerns about regulatory blind spots.
“Diversionary Schemes” Under Scrutiny
The Commerce Department’s policy memo accompanying the new rules flagged the risk of so-called “diversionary schemes” — where companies create new subsidiaries or restructure ownership to continue doing business despite sanctions. While the rule takes immediate effect, a 60-day grace period has been granted to certain firms to adjust compliance procedures.
Broader Implications
The crackdown underscores Washington’s increasing alarm over China’s rapid advancements in chipmaking and artificial intelligence, which have major national security and economic implications. The initial blacklisting of Huawei in 2019 has since expanded into a sweeping effort to curtail China’s access to cutting-edge technologies.
Analysts warn that the latest restrictions could deepen U.S.-China tensions, disrupt global tech supply chains, and further entrench the geopolitical divide over emerging technologies.
