China Sanctions 10 US Firms After Pentagon Blacklist Move

China announced on Monday that it has placed 10 American entities on its export control sanctions list, prohibiting the supply of dual-use goods and technologies to these companies. In a coordinated retaliatory package, Beijing also banned government procurement from 46 US companies, marking a significant escalation in trade and technology tensions between the world’s two largest economies.

The Ministry of Commerce (MOFCOM), under Announcement No. 23 of 2026, imposed the sanctions with immediate effect, citing the need to safeguard national security and fulfill international non-proliferation obligations. The action was taken in direct response to the US Department of Defense’s June 8 expansion of its “Chinese Military Companies” (Section 1260H) list, which grew from 134 to 188 Chinese entities, as reported by Xinhua News.

The Sanctioned Entities

The 10 US entities placed on the export control list span defense, aerospace, drone technology, and rare earth processing sectors. They include Aveox, Inc., Red Cat Holdings, Inc., Teal Drones, Inc., IMSAR, LLC, JAYA Robotics, Inc., Ball Aerospace Technologies Corporation, Oshkosh Defense, LLC, L3Harris Maritime Services, Inc., Mountain Pass Materials, Inc., and USA Rare Earth, LLC, according to Lianhe Zaobao.

Notably, the list includes Mountain Pass Materials — a major US rare earth miner in which the US Department of Defense holds shares — and USA Rare Earth, an emerging rare earth producer. Both companies have been working to build rare earth processing capacity outside China following Beijing’s April 2025 export controls on rare earths and magnets.

Coordinated Retaliation Package

In a parallel action on the same day, China’s Ministry of Finance announced a ban on government procurement from 46 US companies, including major defense contractors such as Lockheed Martin, Raytheon, General Atomics, and Boeing Defense. The ban explicitly excludes US-invested companies operating within China, as reported by Oriental Daily.

A MOFCOM spokesperson stated that the sanctions target “US military-related entities” and that “no export operator shall violate this regulation.” The spokesperson further noted that special cases may apply to MOFCOM for approval on a case-by-case basis.

Background: The 1260H List Expansion

The Chinese retaliation follows the Pentagon’s June 8 update of its Section 1260H list, which for the first time brought all three of China’s major tech giants — Alibaba, Baidu, and Tencent — onto the list simultaneously, along with major EV makers BYD and NIO, biotech firm WuXi AppTec, and memory chip makers CXMT and YMTC. While the list itself does not constitute immediate sanctions, under US law the Department of Defense is prohibited from directly contracting with listed entities, and from 2027 this prohibition expands to include third-party procurement.

The expansion came less than a month after President Donald Trump’s May 15 visit to China, where he met with President Xi Jinping and both sides agreed on a framework of “constructive strategic stability.” The rapid deterioration of that understanding highlights deep structural mistrust between the two powers.

Expert Analysis

Professor Joseph Liow of Nanyang Technological University in Singapore, speaking to Lianhe Zaobao, identified three main tools at China’s disposal: adding more US companies to the unreliable entity list, invoking the Anti-Foreign Sanctions Law, and further tightening rare earth export controls — which he described as “the most powerful countermeasure.”

Shanghai-based international relations scholar Shen Dingli offered a sobering assessment of the trajectory of US-China relations, suggesting they are likely to be characterized by “stable non-cooperation” in the security domain and “stable cooperation” in non-security domains. He noted that the so-called “constructive” aspect means that even as competition continues, both sides must avoid heading toward armed conflict.

Implications and Outlook

The dual-track escalation — combining export controls with a procurement ban — represents a calibrated but significant Chinese response. The inclusion of rare earth companies on the sanctions list signals Beijing’s willingness to weaponize its dominant position in rare earth processing, a sector where China controls approximately 60% of global mining and over 80% of processing capacity.

For US defense contractors such as Ball Aerospace, L3Harris, and Oshkosh Defense, the restrictions on dual-use items could disrupt supply chains that rely on Chinese components. The broader implications point toward accelerating technology decoupling between the two economies, with global supply chains caught in the crossfire.

As scholars have noted, the “constructive strategic stability” framework agreed upon by Trump and Xi in May appears increasingly fragile. Whether further Chinese action — such as tightening rare earth export controls — follows, and how Washington chooses to respond, will determine whether this escalation remains contained or spirals into a deeper confrontation.