US-Iran sanctions push faces China challenge ahead of Trump-Xi summit

The Trump administration's new economic pressure campaign against Iran is facing a significant test: China, Tehran's largest trading partner and leading oil buyer. While Treasury Secretary Scott Bessent has declared an “economic onslaught” on Iran's global financial connections, Beijing has signalled it will not easily comply, and Washington appears cautious about forcing the issue ahead of a planned summit between President Donald Trump and Chinese leader Xi Jinping.

Bessent announced the initiative, dubbed “Operation Economic Outcast,” on Monday, targeting nearly 60 Iran-linked entities accused of involvement in Iran's nuclear programme and other activities. However, his remarks lacked specifics on how the U.S. would address Chinese entities that continue to purchase Iranian crude, often through indirect channels. Analysts say this omission is deliberate, as the administration balances maximum pressure on Iran with avoiding a rupture with China that could harm the American economy.

China receives more than 80% of Iran's oil exports, mostly via ship-to-ship transfers that obscure the crude's origin. Beijing has defended its trade with Iran as “within the framework of international law.” Chinese Foreign Ministry spokesperson Lin Jian said that China-Iran cooperation “should not be disrupted or undermined” and that China would “take all necessary measures to safeguard its own rights and interests resolutely.” He reiterated Beijing's opposition to “illegal unilateral sanctions.”

Edgard Kagan, senior adviser and Freeman Chair in China studies at the Centre for Strategic and International Studies, described Beijing's response as “a holding response.” He said China might do the minimum to comply without openly confronting Washington. “They've tended to be careful not to cross explicit red lines, but they haven't addressed the spirit of what the U.S. has sought,” Kagan said.

Kagan noted that the timing of the sanctions announcement was careful: “The announcement yesterday was very careful in my view to avoid specifics [against China], which could have led to a disruption in the summit.” He added that both leaders have a stake in the meeting's success. “For Mr. Xi, a state visit to Washington is a big deal; and for Mr. Trump, hosting it is a big deal,” Kagan said. He served as U.S. ambassador to Malaysia until February.

Sun Yun, director of the China programme at the Stimson Centre, a Washington think tank, said China's cooperation would depend on the U.S. objectives. If Washington seeks to destroy Iran's economy or bring about regime change, Beijing is unlikely to assist. However, if the goal is to pressure Iran on issues like the Strait of Hormuz or to end the conflict, Sun said, “China can and will demonstrate its cooperation without having to sever ties with Iran completely.”

Sun suggested that China might reduce oil imports from Iran as a symbolic gesture. “China only needs to do enough to demonstrate it is cooperating,” she said. Given the upcoming summit, “neither side wishes to have a major escalation bilaterally at this point. China needs to give the US something, and the US needs to understand and accept that it is not going to be everything U.S. asks for.”

So far, the Trump administration has stopped short of imposing sanctions on major Chinese businesses or banks that are integrated into the U.S. financial system. That restraint suggests Washington is wary of triggering a broader trade conflict with Beijing. Whether the new campaign can achieve its aims will likely depend on how both sides navigate their shared interest in a stable bilateral relationship.