🇺🇸🇨🇳 US-China Trade Relations 2026: Tariffs, Export Controls, and What They Mean for Your Due Diligence Strategy
For the fifth consecutive year, US-China relations rank as the number one challenge for American companies operating in China. And it’s not hard to see why. In 2026, the bilateral trade relationship is a tangled web of tariffs, export controls, sanctions, and counter-sanctions — a landscape that shifts almost monthly and keeps compliance teams up at night.
But here’s the thing: tariffs and export controls aren’t just policy issues — they’re due diligence issues. Every new restriction, every new entity list, every new licensing requirement changes the risk profile of your Chinese partners, suppliers, and customers. If you’re not tracking these developments and adjusting your counterparty verification accordingly, you’re flying blind.
📌 The bottom line: 72% of US companies are affected by tariffs, and nearly 50% are impacted by US export controls. The companies that thrive in this environment are the ones that treat trade policy intelligence as a core part of their due diligence and risk management process — not an afterthought.
1. The Tariff Landscape: Higher Costs, No Reshoring
The tariff story in 2026 is one of persistent pain with no strategic payoff. Despite a trade truce reached in late 2025 that temporarily suspended some of the most extreme tariffs, the number of companies affected by tariffs has actually increased — not decreased.
The “Reshoring” Myth
One of the most frequently cited justifications for tariffs is that they will bring manufacturing back to the United States. The data says otherwise. Since the so-called “Liberation Day” tariffs, there has been no material change in US manufacturing capacity or overall import dependence.
Companies are responding to tariffs in pragmatic ways:
- 53% are absorbing costs internally
- 42% are renegotiating with suppliers
- 36% are expanding production in third countries
- Only 14% expanded production in the US
In other words, companies are diversifying, not reshoring. And diversification brings its own due diligence challenges: new suppliers in new countries, new regulatory regimes, new compliance requirements.
2026 Tariff Updates: A Moving Target
Just when you thought the tariff picture was stabilizing, new measures keep coming:
- In February 2026, the US Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were illegal, prompting the administration to replace them with Section 301 tariffs
- In July 2026, the US imposed a new 12.5% Section 301 tariff on Chinese goods over alleged “forced labor” issues, stacking on top of existing tariffs
- China has urged the US to remove these unilateral measures, arguing they violate commitments to cap tariffs on Chinese goods at 20%
- The current trade truce is set to expire in November 2026, with the US administration signaling it is “not in a hurry” to extend it
💡 Why this matters for due diligence: Tariffs directly impact the financial health and viability of your Chinese partners. A supplier that was profitable last year may be struggling this year under the weight of cumulative tariff costs. Your due diligence needs to go beyond static credit reports and assess how tariff exposure affects your counterparty’s margins, pricing, and long-term sustainability.
2. US Export Controls: The Self-Inflicted Wound
Perhaps the most striking finding of the 2026 USCBC survey is this: US export controls are not achieving their stated goals — but they are definitely hurting American companies.
According to a July 2026 flash survey by USCBC, months-long licensing delays have cost American companies billions of dollars in lost exports and significantly eroded their global market share. The items in question? Often, they’re technologies that are already available from non-US suppliers — meaning the controls aren’t denying China access; they’re just denying US companies the sale.
The Unintended Consequence: Strengthening Chinese Competitors
When US export controls restrict American companies from selling to Chinese customers, those customers don’t simply give up — they buy from someone else. And increasingly, that “someone else” is a Chinese company that has developed its own alternative.
This dynamic is captured in the numbers:
- 61% of affected companies say their sales have gone to Chinese competitors
- 47% say sales have gone to international (non-US) competitors
- In 2025, China’s direct imports of chipmaking equipment from the US fell by over 34%, while imports from Singapore, Malaysia, Japan, and the Netherlands surged
As one USCBC official put it: “Poorly calibrated US export controls weaken American companies in China”.
🔍 The due diligence connection: When your Chinese counterpart has been cut off from US suppliers, they may have turned to alternative, less-vetted sources. This introduces new risks: quality control issues, supply chain instability, and even sanctions exposure if they’re dealing with parties on restricted lists. Verifying your Chinese partner’s supply chain resilience and compliance status is no longer optional — it’s essential.
3. China’s Export Controls: The Rising Tide
While US export controls have grabbed headlines, China has been building out its own export control regime — and it’s becoming a significant factor for international businesses.
Rare Earth Controls
In April 2025, China imposed export controls on medium and heavy rare earths and magnets, sending shockwaves through US supply chains. Subsequent negotiations led to a one-year suspension of the most stringent measures, but the underlying control mechanism remains in place.
According to USCBC research, access to Chinese rare earths remains challenging even after the suspension, with companies facing:
- Opaque and lengthy licensing processes
- Quarterly quota limitations
- Complex coordination with suppliers
Three-quarters of surveyed companies are actively seeking alternative sources for rare earths and critical minerals outside China — a major supply chain shift that requires extensive due diligence on new suppliers.
The June 2026 Escalation: 10 US Entities Added to Export Control List
On June 22, 2026, China’s Ministry of Commerce took a significant step: it added 10 US entities to its export control list, effectively prohibiting the export of dual-use items to these companies. The list includes:
- Aveox, Inc. — manufacturer of specialized motors for mission-critical applications
- Red Cat Holdings, Inc. — drone technology
- Teal Drones, Inc. — unmanned aerial systems
- Ball Aerospace & Technologies Corp. — aerospace and defense
- Oshkosh Defense, LLC — defense vehicles
- L3Harris Maritime Services, Inc. — maritime defense
- MP Materials Corp. — one of the largest US rare earth producers
- USA Rare Earth, Inc. — another major US rare earth company
China framed the move as retaliation for the US Department of Defense’s expansion of its “Chinese military companies” list. The dual-use item ban prohibits not only Chinese exporters but also any organization or individual from any country from transferring or providing Chinese-origin dual-use items to these entities — a provision with global supply chain implications.
On the same day, China also restricted 46 US firms from government procurement.
August 2026: More Countermeasures
In early August 2026, China announced additional countermeasures against six US entities over their alleged support for US sanctions related to Xinjiang. The list includes Applied DNA Sciences, Stratum Reservoir, Altana Technologies, Responsible Business Alliance, Verite Group, and Human Rights in China. A seventh company, Compliance Testing LLC, was also added.
China also tightened export controls on drone-related dual-use items to the US, requiring case-by-case review with no licensing facilitation.
⚠️ The compliance imperative: These lists are dynamic and expanding. If you’re doing business with any entity that sells to, buys from, or partners with companies on these lists, you could be exposed to significant compliance risk. Your due diligence needs to include regular screening against both US and Chinese restricted party lists — and that means working with verified, up-to-date data.
4. The Dual Compliance Dilemma
Perhaps the most challenging development in 2026 is the escalating conflict between US and Chinese legal regimes. Nearly 60% of companies now cite conflicts between US and Chinese laws as a major compliance challenge — up 18 percentage points from the previous year.
This isn’t an abstract problem. Consider the following:
🇺🇸 US Requirements
- Export controls restrict selling certain technologies to Chinese entities
- Sanctions prohibit transactions with designated parties
- Supply chain due diligence requirements (e.g., forced labor provisions)
- License applications subject to months-long delays
🇨🇳 Chinese Requirements
- Counter-sanctions prohibit complying with foreign sanctions against Chinese entities
- Export controls restrict supplying dual-use items to designated US entities
- New economic security laws (State Council Orders No. 834 and 835) authorize monitoring and intervention in supply chains
- First-ever “blocking order” issued in May 2026 against US sanctions
As the USCBC report starkly notes: “China, which was once careful to avoid putting companies in compliance conflicts, no longer does so.” The compliance burden has shifted from a theoretical risk to a daily operational reality for many multinationals.
🚨 The due diligence wake-up call: If you’re not already doing it, you need to screen all Chinese counterparties against both US and Chinese restricted party lists. You need to understand not just who they are today, but who they’re doing business with — because a second-tier supplier or customer could be the one that triggers a compliance violation. This is why comprehensive due diligence that goes beyond basic credit checks is no longer a luxury — it’s a necessity.
5. What This Means for Your Due Diligence Strategy
So how should international companies adapt their due diligence practices in light of these developments? Here are four concrete recommendations:
1. Screen Against Multiple Restricted Party Lists
Gone are the days when checking a single US sanctions list was sufficient. Today, you need to screen against US, Chinese, and even EU restricted party lists. And because these lists are updated frequently (China added 10 entities in June 2026 and 6 more in August 2026), your screening needs to be ongoing, not one-time.
2. Assess Supply Chain Exposure
Your direct counterparty may be clean — but what about their suppliers? Their customers? With the expanding scope of both US and Chinese export controls, second- and third-tier relationships matter. Your due diligence should include mapping your counterparty’s key supply chain relationships and assessing their exposure to restricted parties.
3. Verify Financial Health Under Tariff Pressure
Tariffs are eroding margins across many industries. A credit report from six months ago may not reflect the current reality. Up-to-date financial and operational data is essential for assessing whether your Chinese partner can survive — and thrive — in the current tariff environment.
4. Monitor Regulatory Developments in Real Time
The trade policy landscape is changing too fast for annual or even quarterly reviews. You need a system for continuous monitoring of regulatory developments that could affect your Chinese counterparties. This includes tracking new entity list additions, tariff changes, and new compliance requirements.
🎯 The strategic advantage: In an environment where trade policy changes weekly and compliance risks multiply daily, information is your most valuable asset. Companies that invest in verified, up-to-date intelligence on their Chinese partners — their ownership, their financial health, their supply chain relationships, and their regulatory exposure — will make better decisions, avoid costly compliance violations, and capture opportunities that their less-informed competitors miss.
6. The Bottom Line
The US-China trade relationship in 2026 is complex, volatile, and unforgiving. Tariffs continue to raise costs and suppress sales. US export controls are undermining American competitiveness without achieving their strategic goals. China’s expanding export control and counter-sanctions regime is creating a new layer of compliance risk that few companies are fully prepared for.
But here’s the good news: this complexity creates opportunity for companies that get it right. The companies that succeed will be those that treat trade policy intelligence and due diligence as strategic functions, not administrative burdens. They’ll know their Chinese partners inside and out — their ownership, their supply chains, their regulatory exposure, their financial resilience.
They’ll be the ones who can answer the question that matters most: Do you really know your Chinese partners?
This article is based on data from the USCBC 2026 Member Survey and Member Survey report, China’s Ministry of Commerce announcements, and other publicly available sources as of August 2026.
About ChinaBizInsight — We help international companies know their Chinese partners through verified enterprise credit reports, customized due diligence, document retrieval, and apostille/legalization services. Whether you’re entering China for the first time or expanding existing operations, ChinaBizInsight provides the intelligence you need to make confident decisions in an increasingly complex environment.
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