Expanded US biotech investment curbs draw warning of countermeasures from China

A US Treasury proposal would widen and tighten restrictions on US investment in China. Bloomberg reported over the weekend that a Chinese official said China “firmly opposes” the proposal, describing it as discriminatory and “a typical example of an overly broad application of national security concerns,”

Warning that the rule would harm economic relations between the two countries, China’s Commerce Ministry said it would closely monitor further developments. The ministry also reserved China’s right to take corresponding measures but did not specify what these could involve.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Under a rule proposed by the US Treasury on Thursday, the Outbound Investment Security Program would be broadened. Restrictions on US investment in hypersonics, quantum, high-performance computing, supercomputing and AI in China, Russia and North Korea would be tightened. Biotechnology was also added to the sectors targeted by the measure.

0.09% decline in AUD/USD

AUD/USD is down 0.09% on the day at 0.7028 at the time of writing. The Australian Dollar (AUD), a proxy for China, is edging lower in response to these developments.

US-China Trade War: Key Questions

Defining a “trade war”

Extreme protectionism by one side can trigger an economic conflict between two or more countries, generally described as a trade war. Trade barriers, including tariffs, prompt retaliatory barriers. The resulting rise in import costs pushes up the cost of living.

2018: Origins of the US-China trade war

Early in 2018, President Donald Trump imposed trade barriers on China, triggering an economic conflict between the United States (US) and China. Trump cited unfair commercial practices and intellectual property theft by the Asian giant. In retaliation, China levied tariffs on a range of US products, including automobiles and soybeans. Escalating tensions continued until January 2020, when the countries signed the US-China Phase One trade deal. Alongside structural reforms and other changes to China’s economic and trade regime, the agreement sought to restore stability and trust between the two nations. The Coronavirus pandemic subsequently diverted attention from the dispute. President Joe Biden, who succeeded Trump, nevertheless retained the tariffs and introduced additional levies.

2.0: Renewed trade war tensions

60% tariffs on China were a pledge of Donald Trump’s 2024 election campaign. He promised to impose them upon returning to office, which he did on January 20, 2025. His return to the White House as the 47th US President has reignited tensions between the two countries. With Trump back in office, the US-China trade war is expected to pick up where it left off. Tit-for-tat policies are set to affect the global economic landscape amid global supply chain disruptions, reducing spending, particularly investment, and feeding directly into Consumer Price Index inflation.