Trump's new economic squeeze on Iran has a big challenge: China

WASHINGTON (AP) — The “ economic onslaught ” that Treasury Secretary Scott Bessent has declared on Iran's financial connections around the world may have one major caveat: China .

Beijing is Iran's biggest trading partner and its leading oil buyer. While the U.S. is trying to isolate the Islamic Republic from its remaining economic partners, President Donald Trump also is preparing to host Chinese leader Xi Jinping next month to maintain a fragile trade truce .

Absent from Bessent's remarks this week were specifics about how the Trump administration would target China, casting doubts on how effective the new campaign would be when the U.S. must balance putting maximum pressure on Iran and avoiding higher tensions with China that could be costly to the American economy.

“The announcement yesterday was very careful in my view to avoid specifics (against China), which could have led to a disruption in the summit,” Edgard Kagan, senior adviser and Freeman Chair in China studies at the Center for Strategic and International Studies, said Tuesday. “For Xi, a state visit to Washington is a big deal; and for Trump, hosting it is a big deal.”

That means both Washington and Beijing will have a dance to do, said Kagan, who served as U.S. ambassador to Malaysia from December 2023 until this February.

"I think the real question is, is there room to push (the Chinese) to reduce what they're doing with Iran, to put more pressure on the Iranian regime in a way that doesn't lead them to say, 'This is unreasonable, and we're not going to comply,'” he said.

In response to “Operation Economic Outcast,” which Bessent announced Monday, Beijing said its cooperation with Iran has always been “within the framework of international law." China receives more than 80% of Iranian oil shipments but usually through indirect channels.

Lin Jian, a spokesperson for the Chinese foreign ministry, said China-Iran cooperation “should not be disrupted or undermined."

“China is closely monitoring relevant developments and will take all necessary measures to resolutely safeguard its own rights and interests,” Lin said. He repeated China's opposition to “illegal unilateral sanctions."

Kagan described Beijing's remarks as “a holding response" and said Beijing will try to do the least to comply without openly confronting the U.S.

“They’ve tended to be careful not crossing explicit red lines, but they haven’t addressed the spirit of what the U.S. has sought,” Kagan said, pointing to practices such as ship-to-ship oil transfers that obscure the origin of Iranian crude oil to evade American sanctions.

Sun Yun, director of the China program at the Stimson Center, a Washington think tank, said China will not go along with the new campaign if the U.S. goal is to destroy the Iranian economy and seek the government's collapse.

But “if the goal is to exert enough pressure for Iran to make concessions on the Strait of Hormuz and potentially ending the conflict, I think China can and will demonstrate its cooperation without having to completely sever ties with Iran,” Sun said. “China only needs to do enough to demonstrate it is cooperating, such as cut back on its oil import from Iran.”

With a planned summit between Trump and Xi weeks away, “neither side wishes to have a major escalation bilaterally at this point,” she said. “China needs to give U.S. something, and U.S. needs to understand and accept that it is not going to be everything U.S. asks for.”

So far, the Trump administration has refrained from imposing sanctions on major Chinese businesses or banks connected to the U.S. financial system and thus vulnerable to American penalties.

The Treasury Department said Monday that it was penalizing nearly 60 Iran-linked entities, accusing them of involvement in Iran’s nuclear and missile programs, cyber activities and oil shipments.

It targeted a number of entities and individuals based in mainland China and Hong Kong for supporting Iran’s missile and nuclear programs. It sanctioned a China-owned crude oil tanker for transporting millions of barrels of Iranian oil to China this year as well as a Hong Kong-based business for its role in the shadow fleet that ships out Iranian oil.

With Xi's visit coming up, Trump may not act tough on China now, said Ali Wyne, senior research and advocacy adviser on U.S.-China relations at the International Crisis Group.

“Given how keen Trump has been to maintain both a trade truce between the United States and China and his personal rapport with Xi, he seems unlikely to do a volte-face just a month before Xi’s state visit and adopt a highly confrontational posture,” he said.

Plus, Xi’s visit to the U.S. could pave the way for Trump to return to China in November for the leaders summit of the Asia-Pacific Economic Cooperation grouping.

In his second term, Trump has been less hawkish on China than in his first presidency and frequently touts his good relationship with Xi following a major trade war last year that featured back-and-forth escalating tariffs . The U.S. business community also welcomes Xi's visit, saying it's a good sign if the two leaders meet in person, even when any substantial deals may be elusive.

“Beijing is betting that Washington will be reluctant to jeopardize the current leader-level dynamic by targeting major Chinese entities before the summit," said Craig Singleton, senior director for China at the Foundation for Defense of Democracies, a hawkish Washington think tank.

Amiri reported from New York. Associated Press writer Aamer Madhani contributed to this report.