The Trump administration is planning to designate 89 Chinese and 28 Russian entities as “military end-users,” restricting American companies from doing business with them, Reuters reported citing a draft document.
If the list is published, US suppliers will have to obtain special licenses from the US government to export various items to those firms. This reportedly applies to everything from computer software like word processing, to scientific equipment like digital oscilloscopes, and aircraft parts and components.
While obtaining such a license is possible in theory, the rule, drafted by the US Commerce Department, says that applications for dealing with the firms labeled as “military end-users” are more likely to be denied. The designation was previously expanded and now even companies primarily focused on civilian business can fall under the definition of entities suspected of supporting or contributing to the maintenance or production of military items.
The document currently includes a total of 177 companies, primarily Chinese, but is considered an “initial tranche” and could be further expanded, Reuters says. Companies such as the Commercial Aircraft Corp of China (COMAC), Aviation Industry Corporation of China (AVIC) and its subsidiaries, as well as Russia’s Irkut corporation are reportedly among those named on the list.
The move may create hurdles for American suppliers like General Electric and Honeywell International, as they both supply COMAC and have joint ventures with AVIC, the report notes. However, European producers could benefit from it, as Chinese buyers may switch to them instead of restricted US exports.
Both COMAC and Irkut are developing their own narrow-body airliners, seen as direct competitors to the ill-fated Boeing 737 MAX that was grounded worldwide after two deadly crashes that killed 346 people. While the US aviation regulator has already cleared the jets to fly again and Europe is ready to give them a green light, China is still not ready to lift the flight ban. This means that Boeing’s once-bestselling planes are still are still restricted from the US company’s biggest market.
On Monday, China’s Foreign Ministry slammed the latest US initiative, saying that it violates market competition and international trade policies.
New export restrictions could further escalate tensions between Washington and Beijing amid existing tariffs and increased pressure on Chinese companies. Earlier this month, US President Donald Trump signed an executive order barring American investment in so-called Chinese “military companies.”