What challenges does the export of sensitive goods face under the Sino-US trade friction?

Under the background of Sino-US trade friction, the export of sensitive goods (such as high-tech products, strategic materials, military-related technologies, etc.) faces multiple challenges, involving policies, laws, supply chains and markets. The following is an analysis of the main challenges:

1. Rising policy and legal risks
   Export control list expansion
   The United States has passed the Export Control Reform Act (ECRA) and the “Entity List” to restrict China’s access to sensitive technologies (such as semiconductors, AI, quantum computing, etc.). Chinese companies exporting related products may face license approval stagnation or direct bans.

Impact of China’s countermeasures
China has issued countermeasures such as the “Unreliable Entity List Regulations” and the “Export Control Law”. Companies need to deal with the compliance requirements of both China and the United States at the same time, and the dual regulatory pressure has increased.

Long-arm jurisdiction risk
The United States uses the “Foreign Direct Product Rule” (FDPR) to restrict third countries from reselling sensitive goods containing US technology to China (such as the Huawei case). Companies may be retroactively sanctioned due to US components in the supply chain.

2. Supply chain reconstruction and cost pressure
   Supply cut of key components
   The United States restricts the export of chip manufacturing equipment (such as ASML lithography machines) and high-end materials (such as rare earth processing technology) to China, resulting in interruptions or delays in the production chain of sensitive goods in China.

Supply chain decoupling is accelerating
Some multinational companies have transferred production capacity to Southeast Asia or Mexico to circumvent tariffs and regulations. Domestic exporters need to find alternative suppliers again, pushing up costs.

Logistics and payment barriers
Sensitive goods may be detained and reviewed by US customs, and banks refuse to process related trade settlements due to compliance risks (such as restrictions on US dollar transactions).

3. Technological competition and market access restrictions
   Technological blockade intensifies
   The United States and its allies (such as the Netherlands and Japan) have tightened technology exports to China and restricted Chinese companies’ technological cooperation in the global market (such as 5G and biomedicine).

Terminal market shrinkage
Sensitive goods face high tariffs (such as the 301 tariffs on China during the Trump era) or direct bans in the US and European markets, forcing companies to turn to emerging markets, but with compressed profit margins.

4. Compliance and audit complexity soars
   Due diligence burden increases
   Enterprises need to screen whether their customers and partners are included in the US BIS “Entity List” or China’s “Unreliable Entity List”, and compliance costs (such as legal advice and auditing) have increased significantly.

Cross-border data risks
Sensitive goods involving cross-border data transmission (such as cloud services, smart devices) may violate US and Chinese data security regulations (such as China’s “Data Security Law” and the US CLOUD Act).

5. Geopolitical uncertainty
   Dynamic sanctions risks
   The fluctuations in Sino-US relations lead to sudden policy changes (such as the escalation of the Taiwan Strait issue may trigger new sanctions), making it difficult for companies to formulate long-term export strategies.

Reputation and ESG pressures
Exports of sensitive goods may be associated with “human rights” or “military use” (such as Xinjiang supply chain issues) by international public opinion, affecting brand image.

Countermeasures
Strengthen the compliance system

Establish a dual-track compliance team in China and the United States to track the updates of control lists in real time (such as the US EAR and China’s “Catalogue of Technologies Prohibited and Restricted from Export”).

Use automated tools to screen controlled items in the supply chain (such as ECCN coding classification).

Supply chain diversification

Deploy local alternative technologies (such as domestic chips and industrial software) to reduce dependence on the United States.

Establish backup production capacity in RCEP or “Belt and Road” countries.

Flexible market strategy

Turn to markets such as the Middle East and Latin America that are less affected by trade frictions.

Avoid some regulations through technical cooperation (such as joint ventures).

Use policy tools

Apply for Chinese export tax rebates or subsidies to offset tariff costs.

Challenge unfair sanctions through the WTO dispute settlement mechanism (need to carefully assess political impact).

Summary
The essence of Sino-US trade frictions is a struggle for dominance in science and technology and rules. Exporters of sensitive goods need to find a balance between “compliance survival” and “technological independence”. Short-term challenges are severe, but long-term opportunities that force China’s industrial chain to upgrade also exist.