Expanded US investment curbs on biotech prompt China to warn of countermeasures

A US Treasury proposal to broaden and tighten restrictions on US investment in China has drawn firm opposition from China, Bloomberg reported over the weekend. A Chinese official said the country “firmly opposes” the proposal, describing it as discriminatory and “a typical example of an overly broad application of national security concerns,” according to the report.

Warning that the rule would harm bilateral economic ties, China’s Commerce Ministry said it would closely monitor further developments. The ministry also stated that China reserves the right to take corresponding measures, but did not indicate what these could involve.

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

Under a rule proposed on Thursday, the US Treasury would expand the Outbound Investment Security Program and impose tighter limits on US investment in hypersonics, quantum, high-performance computing, supercomputing and AI in China, Russia and North Korea. Biotechnology was also added to the list of targeted sectors.

How has the market responded?

The Australian Dollar (AUD), widely viewed as a proxy for China, is trading slightly lower after these developments. At the time of writing, AUD/USD stands at 0.7028, down 0.09% on the day.

US-China Trade War: Key Questions Answered

What defines a “trade war”?

A trade war broadly describes an economic dispute involving two or more countries, triggered by extreme protectionism on one side. When trade barriers such as tariffs are introduced, they prompt retaliatory barriers. This pushes up import costs and, in turn, the cost of living.

How did the US-China trade war develop?

The United States (US) and China entered an economic conflict in early 2018 after President Donald Trump imposed trade barriers on China, alleging 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. The dispute intensified before the countries signed the US-China Phase One trade deal in January 2020. Requiring structural reforms and other adjustments to China’s economic and trade regime, the agreement was intended to rebuild stability and trust between the two countries. Attention subsequently shifted away from the dispute with the Coronavirus pandemic. Nevertheless, President Joe Biden, who succeeded Trump, retained the tariffs and introduced further levies.

What does trade war 2.0 involve?

Tensions between the two countries have flared again following Donald Trump’s return to the White House as the 47th US President. During his 2024 election campaign, Trump promised to levy 60% tariffs on China upon returning to office. He took office again on January 20, 2025. His return is expected to see the US-China trade war pick up where it left off, with reciprocal policy measures shaping the global economic landscape. Against a backdrop of disrupted global supply chains, these measures are set to reduce spending, particularly investment, while feeding directly into Consumer Price Index inflation.