China Bans Dual-Use Exports to 10 US Entities in Trade War

China’s Ministry of Commerce (MOFCOM) on Monday announced an immediate ban on exports of dual-use items to 10 US entities, including rare earth miners MP Materials Corp. and USA Rare Earth Inc., in a direct retaliation for the Pentagon’s recent expansion of its “Chinese military companies” list. The move, effective upon publication of Announcement No. 23 of 2026, marks the most significant escalation in US-China trade tensions since President Trump’s state visit to Beijing last month.

The Targeted Entities and Scope of Restrictions

The 10 US entities placed on China’s export control list span defense, aerospace, robotics, and critical minerals sectors. They include drone manufacturer Teal Drones Inc., autonomous underwater vehicle developer Jaia Robotics Inc., military equipment supplier Oshkosh Defense LLC, aerospace contractor Ball Aerospace & Technologies Corp., and maritime defense services firm L3Harris Maritime Services, as well as Aveox Inc., Red Cat Holdings Inc., and IMSAR LLC.

According to Caixin Global, the ban prohibits any organization or individual — regardless of country or region — from exporting, transferring, or supplying Chinese-origin dual-use items to these entities. All ongoing export activities must cease immediately, with exceptions only available through special application to MOFCOM. Dual-use items are defined as goods, software, or technology that have both civilian and military applications.

The Trigger: Pentagon’s Section 1260H List Expansion

The Chinese action comes in response to the US Department of Defense’s June 8 publication of an updated “Chinese Military Companies” list under Section 1260H of the National Defense Authorization Act. As CNBC reported, the Pentagon expanded the list from 134 to 188 entities, adding major Chinese technology firms including Alibaba, Baidu, BYD, Nio, WuXi AppTec, Unitree Robotics, and RoboSense.

While the list itself does not impose immediate sanctions, it prohibits the Department of Defense from directly contracting with listed entities, with the restriction expanding to third-party procurement by June 2027. Alibaba, Baidu, and WuXi AppTec have all denied any involvement in China’s military-civil fusion strategy, stating they are not Chinese military enterprises.

Timing and Diplomatic Context

The escalation is particularly notable for its timing. It comes less than six weeks after President Trump’s May 15 visit to China, where he met with President Xi Jinping and the two sides agreed to pursue “constructive strategic stability.” The Lianhe Zaobao reported that Chinese officials had warned on June 13 of “resolute and strong countermeasures” against the US list expansion, accusing Washington of disregarding the summit consensus.

Professor Shen Dingli, a Shanghai-based international relations scholar, told Lianhe Zaobao that “‘constructive strategic stability’ is just talk,” predicting that US-China relations will settle into “stable non-cooperation” in security areas and “stable cooperation” in non-security domains.

Rare Earth Supply Chains at the Center

The inclusion of MP Materials and USA Rare Earth is strategically significant. China dominates the global rare earth supply chain, controlling approximately 60% of mining and 90% of processing capacity. MP Materials owns the Mountain Pass mine in California — the only operational US rare earth mine — and has received financial support from the US Department of Defense since July 2025 to build a second magnet plant by 2028.

As Reuters noted, both companies still rely on Chinese processing capabilities, making them vulnerable to export restrictions. The ban threatens to disrupt US efforts to build alternative rare earth supply chains, coming on top of China’s April 2025 export controls on key rare earth elements and magnets.

Analysis: A Pattern of Escalation

Professor James Loo (Luo Minghui) of Nanyang Technological University in Singapore, cited by Lianhe Zaobao, described China’s available countermeasures as threefold: adding more US companies to the “Unreliable Entities List,” invoking the Anti-Foreign Sanctions Law to issue prohibition orders, and further tightening rare earth export controls — the most powerful option.

“The US and China both have an increasing tendency toward ‘securitization’ — refusing to compromise on matters involving national security,” Loo said. “This makes the ‘constructive strategic stability’ framework harder to maintain, but a single incident is unlikely to cause the entire framework to collapse.”

What to Watch For

The coming weeks will reveal whether the US responds with additional retaliatory measures. China has signaled it has further tools available, including expanding its export control list and leveraging its dominant position in critical minerals. On the same day as this announcement, China also banned 46 US companies from government procurement, though excluding US companies operating in China.

The broader trajectory points toward accelerating decoupling in sensitive technology sectors. Both sides are systematically reducing economic interdependence, with the US expanding its military-linked company list while China tightens control over strategic minerals. For global markets and supply chains, the question is not whether this competition will continue, but how far it will escalate before both sides pull back from the brink.