Will China's Sanctions on US Defense Firms Roil the Region?

Even before President-elect Donald Trump assumes the presidency of the United States, Beijing has made the first move. It is fueling the boiling Taiwan issue by slapping sanctions on 13 American defense firms, putting pressure on Trump to deal with the frayed US-China ties left over from the Joe Biden administration. This largely symbolic move is in response to the Biden administration's latest arms sales to Taiwan, the island democracy that Beijing considers its own. 

Following the rising tensions with China over trade and other related issues, the US has supplied arms to Taiwan to defend itself from Beijing's perpetual threat to use force to integrate with the mainland. A democratic tiny island cannot match Beijing's military might if left unprotected to defend its sovereignty. But geopolitics does not work in such simplistic terms as a zero-sum game. There are other stakeholders whose interests are too involved in the event of any Chinese misadventure.

But Beijing remains undeterred. On December 5, 2024, it imposed sanctions on more than a dozen US defense firms and several American defense industry executives. This action was in retaliation for the Biden administration's latest batch of arms sales to Taiwan. Besides drones, Beijing's sanctions list also included artificial intelligence companies. With this, mainland China targeted small- to mid-sized American drone manufacturers and service providers. 

The latest sanctions came on the same day that Taiwanese leader William Lai Ching-te transited through Guam. Lai flew into the US territory and home to a key military base after a stop in Hawaii. It was Beijing's sixth round of sanctions on America's defense companies in 2024. 

Leading Up to New Chinese Sanctions

In November 2024, Washington approved a $387 million defense package for Taiwan. This included spare parts for fighter jets, which Beijing felt "seriously damaged its sovereignty and territorial integrity" and vowed a "resolute" response.    

The 13 American firms coming under Chinese sanctions included the drone makers RapidFlight and BRINC Drones. 

Barbara Borgonovi and Gerard Hueber, president and vice-president of Naval Power at Raytheon, were among the six executives sanctioned. So was Blake Resnick, the founder of a major US defense company previously sanctioned by Beijing, and chief executive of BRINC Drones. 

Others coming under sanctions were Kratos Unmanned Aerial Systems, developer of the low-cost XQ-58 Valkyrie combat drone, and Teledyne Brown Engineering, a defense solution subsidiary of industrial conglomerate Teledyne Technologies. The list also included drone technology start-ups Firestorm Labs, Neros Technologies, and HavocAI.

For this, Beijing invoked its recently established Anti-Foreign Sanctions Law, which is part of its expanding assortment of countermeasures. These mirror many of the punitive actions that the US takes against China. China's sanctions against US companies and executives were also in retaliation against Washington's blacklisting of Chinese firms for alleged exports to Russia, besides its sales of arms to Taiwan.  

Mainland Reasoning

China's foreign ministry argues the US "ignored China's objective and fair position against the ongoing conflict between Russia and Ukraine." It "indiscriminately imposed illegal unilateral sanctions on a number of Chinese entities on the grounds of so-called Russian-related factors and engaged in unilateral bullying and economic coercion," the ministry adds. 

The US had blacklisted at least 20 Chinese firms over alleged exports to Russia. (Moscow is facing a number of sanctions for its February 2022 invasion of Ukraine.) 

However, it seems the main reason behind Chinese retaliation this time centers on America's continued arms sales to Taiwan. This Bejing considers a violation of its "One China principle" and as interference in its internal affairs. China is firm in its position that Taiwan is part of its territory and could retake it sometime in the future.       

Earlier in September 2024, Beijing had taken such punitive measures against some US firms in response to arms sales to Taiwan. By implication, this means that the US companies cannot do business in China and the sanctioned executives will be prohibited from entering the country. That includes Hong Kong and Macau. Nevertheless, the Chinese restrictions in effect are only symbolic. That is because US companies manufacturing armaments are already barred from doing business in China by US-imposed restrictions.  

'Core of Its Core Interests'

China regards Taiwan as the "core of its core interests." Chinese President Xi Jinping has vowed that reunification with the island is "inevitable" and that Beijing shall not be deterred from using force if that option becomes necessary. 

Both the US and China have their own arguments. While the issue of arms sales remains one of the most disputed aspects of how Washington and Beijing interpret Taiwan's status, the US adheres to the terms of the Taiwan Relations Act of 1979 that obligate it to provide Taiwan with defensive weapons to ensure its stability. In 1982, Washington and Beijing issued a communiqué agreeing that arms sales would decrease as the status of Taiwan approached a peaceful resolution.

However, accusations and counteraccusations continue and neither side is prepared to change position. So, the Taiwan issue continues to be a thorn in the geopolitical matrix of tensions in the region. While Beijing accused the US of violating its promise, the US complains that Beijing has escalated tensions through military incursions, by holding wargames and violating the island's air space. That is why it finds justification to arm Taiwan adequately so that it can defend itself and protect its sovereignty. 

There is no clarity at the moment on how the incoming Trump administration will deal with the issue. Trump has sent mixed signals about his support for the island democracy. He has called on Taiwan to sharply increase defense spending and complained about its dominance in the global semiconductor industry. At the same time, his announcement of Senator Marco Rubio of Florida as Secretary of State could send a word of comfort to Taiwan. Rubio is known to be sympathetic toward Taiwan, which could worry Beijing.         

Arms Sales the 'Wrong Signal'?        

As it transpired, the sanctions were a countermeasure for the "repeated announcement of arms sales to Taiwan." China alleges these seriously violate its One China principle. Beijing also expects the US to take cognizance of the serious danger that separatist acts of Taiwan independence pose to peace and security across the Taiwan Strait. Thereby, it expects Washington to stop sending the wrong signals to Taiwanese separatist forces.  

Meanwhile, Taiwan has upgraded unmanned platforms. These are key asymmetric weapons that could help defend the island democracy in the event of a conflict with mainland China.  

Besides Beijing's resolve to reunify the island, by force if necessary, it is fiercely opposed to any official ties with its diplomatic partners. The US, like most countries, India included, does not consider Taiwan as an independent country. However, is committed to arming the self-ruled island and is opposed to any change in the status quo.        

Earlier, Beijing sanctioned US defense contractors including the missile and AI divisions of Lockheed Martin. It also targeted Anduril Industries, which has sold its multi-mission aerial vehicle Altius 600M-V to Taiwan. 

Impact on Japan

Friction between the US and China over the Taiwan issue could complicate Japan's ties with China. Tokyo's ties with Taiwan have grown strong. Moreover, the US remains Japan's most important ally and Tokyo cannot afford to jeopardize that either. 

In the larger compass of geopolitical strategic considerations, Tokyo cannot undermine its growing ties with Taiwan just to please China, despite it being an important economic partner. It needs to navigate its relations with the US, China, and Taiwan carefully so that its partner countries' interests are not unduly affected. Meanwhile, at the same time, it must protect and defend its own interests. 

Beijing is unlikely to forget the assertion of former Japanese Prime Minister Shinzo Abe who said in 2021, after stepping down as leader, that "a Taiwan contingency is a contingency for Japan." It would be in the long-term interests of Japan to maintain the existing stronger ties with the US and Taiwan. Such a policy would contribute to the peace and stability of the region. It is encouraging that successive prime ministers after Abe ー Yoshihide Suga, Fumio Kishida, and now Shigeru Ishiba ー subscribe to such a position. 

In November 2024, Chinese President Xi Jinping met Ishiba on the sidelines of the Asia-Pacific Economic Cooperation summit in Peru. In their meeting, Xi urged Ishiba to "face history squarely, be forward-looking, and properly handle historical, Taiwan-related, and other major issues." Such subtle threats are unlikely and should not cut any ice in Japan's strategic calculations.      

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Author: Rajaram Panda, PhD

Dr Rajaram Panda is a senior scholar from India who has taught in and carried out research on Japan for the past 50 years. His latest book is India and Japan: Past, Present and Future (July 2024 by Knowledge World Publisher).