The Iran war has given Trump his best hand against China — now he shouldn’t fold

Summary

The Iran war has given Trump his best hand against China — now he shouldn’t fold President Donald Trump should say the quiet part out loud: China’s years of economic, technological and diplomatic support for Iran did not merely underwrite the regime’s malign activity. It accelerated it, financed it and made striking the Islamic Republic necessary to defend the interests of the United States and its partners around the world. President Trump should rally America’s allies in Europe and the Gulf Arab states behind this message leading up to trade talks with Xi Jinping next month in Beijing. He should make clear that, without China, the Iranian regime would have never been able to pay for waves of military strikes on Israel, target US bases in the region or shut down Gulf energy infrastructure. And he should go one step further. Trump should establish that every country negatively impacted by China’s role as the world’s largest sponsor of sanctions evasion is equally impacted by the Chinese Communist Party’s market-distorting trade practices. In this sense, the strikes on Iran have given Trump an opening to extract concessions from Beijing on a range of issues fundamental to the structure of the global economy. He should therefore leverage America’s economic advantages in energy, trade and finance to not only hold Beijing accountable for its support of the regime in Iran, but to cut at the heart of China’s economic model as well. Here’s how. First, Trump should further target Beijing’s appetite for sanctioned oil. For years, China has sustained its state-subsidized export machine partly on the back of deeply discounted sanctioned crude from Russia, Iran and Venezuela. These sanctioned barrels accounted for roughly a third of China’s crude imports in 2025, saving the country billions. Trump has already removed Venezuela as a source of illicit oil flows, but he can do more to target Russia and Iran. Even amid the strikes, Iranian ships are making their way to China. As for Russia, it supplies over 10% of China’s imported crude. Cutting off these flows would compete with other administration priorities, such as relieving supply shock pressures on oil consumers generated by the war in Iran, but they would effectively raise the cost base for China’s industrial sector and combat its destabilizing, nonmarket practices in a targeted fashion. All of this is compounded by China’s vulnerability to energy supply shocks. About half of China’s oil imports and nearly 30% of its liquefied natural gas (LNG) transit the Strait of Hormuz. Disruptions there hit China far harder than the United States, even with the buffer Beijing enjoys from years of building a strategic oil stockpile. That is why China’s foreign minister initially asked Iran to respect the “reasonable concerns” of its energy exporting neighbors in the Gulf while providing only muted criticism of the US and Israeli attacks. Beijing is now caught between two bad options: Intervene on Iran’s behalf and damage its relationships with the Gulf monarchies it depends on far more than it does on Tehran, or stand aside and watch Washington dismantle a partner in Tehran that Beijing spent years cultivating. The second area of vulnerability relates to trade. The Commerce Department has already imposed statutorily sound tariffs as high as 93% on Chinese goods sold below cost — like anode-grade graphite used in electric vehicle batteries — and could launch further investigations while pressing the World Trade Organization to hold Beijing accountable. Commerce has also concluded that Beijing’s state-directed tactics in the semiconductor and shipbuilding sectors constitute threats to US national security. Chip tariffs took effect in December 2025 and will escalate further in 2027. Meanwhile, suspended shipbuilding remedies are set to snap back this November. These deadlines — coupled with new trade investigations announced just weeks before the summit and dozens of trade agreements being negotiated to bolster partner country export controls and transshipment enforcement — should be seen for what they are: targeted, yet widespread and growing economic leverage aimed squarely at Beijing. Where China has tried to preempt US pressure, its strategy has backfired. Beijing implemented its strictest rare earth and permanent magnet export controls last year, including restrictions directly targeting foreign defense supply chains. It later suspended those controls, but the damage was done. China triggered the exact response it was trying to prevent — a wave of multilateral supply chain diversification, with billions flowing from partners in Australia, Canada, Japan, South Korea, the Gulf and elsewhere into strategic sectors of the US economy. The third vulnerability relates to U.S. dominance in financial flows. The Chinese Communist Party has long sought to distinguish between official government policy and the actions of private companies — but the line between the Chinese state and its commercial empire is far from an impenetrable legal shield. Trump should direct Treasury and State to prepare sanctions designation packages targeting the many Chinese financial institutions that process payments for sanctioned Iranian and Russian crude, the hundreds of Chinese firms operating in sanctioned sectors of those economies and the joint ventures engineered to create distance between sanctioned entities and Chinese state-owned enterprises. These targets should explicitly include China’s state-owned entities that purchase output from so-called “teapot refineries” processing sanctioned crude, as well as any Chinese financial conduits being used to pay the Islamic Revolutionary Guard Corps for access through Iran’s territorial waters in the strait. Washington should signal to Beijing which firms could be targeted, what China stands to lose from being cut off financially and how the US has more targets ready if a deal cannot be reached. But Trump shouldn’t pull the sanctions trigger yet. Beijing is contending with one of the worst housing crises in modern history, collapsing household wealth and persistent deflationary pressure. Efforts to address any of these challenges — let alone all three — will be slow and necessarily weaken CCP control over key state resources. And all of that was true before the war on Iran compounded Beijing’s vulnerabilities. China simply cannot afford financial isolation from the West. It must negotiate. When Trump arrives in Beijing next month, he should push Xi for concrete concessions that this moment has made uniquely possible: a verifiable commitment to halt purchases of sanctioned Iranian and Russian crude; market access reforms that rein in Beijing’s overproduction and state subsidies; strict export controls on dual-use technology and precursor chemical flows to Iran and other US adversaries; and enforceable mechanisms to shut down Beijing’s broader role as a sanctions evasion hub. Washington has real leverage, but that leverage has a shelf life. A protracted conflict risks negatively impacting the petrochemical sector that provides feedstock for plastics, semiconductors, pharmaceuticals and advanced manufacturing globally. The window to extract concessions from Beijing requires an urgent response from Washington — and it should not stand alone in making these demands of Beijing. The war should clarify something for European and Gulf partners that years of US pressure never achieved: China’s support for Iran is not an abstraction. It underwrote the regime that just destabilized their energy security, shipping lanes and regional order. That shared recognition should form the basis for a unified front — not just against Iran, but against the nonmarket practices Beijing has used for decades to hollow out allied industries and subsidize its export machine. It is time to hold Beijing accountable for keeping the Iranian regime afloat. The United States has a full arsenal of American economic statecraft to do just that. Elaine K. Dezenski is senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Max Meizlish is a research fellow. Follow them on X @ElaineDezenski and @maxmeizlish.