China has shifted to limit outbound investments to the US against President Donald Trump’s belligerent trade actions, such as a 54% duty on Chinese imports. Beijing’s action represents a strategic retaliation, employing investment approvals as leverage in current trade talks. Simultaneously, trade tensions between the US and China are rising, with Trump’s most recent tariffs also affecting the EU and Japan. Experts predict that these actions would destabilize global trade and fuel inflation.
China Cuts US Bound Investments
China’s National Development and Reform Commission (NDRC) has ordered its branches to delay approvals for new Chinese investments in the US. The decision, widely seen as a calculated response to Washington’s rising tariffs, allows Beijing to weaponize capital flows in trade negotiations.
In 2023, Chinese investment in the US dropped by 5.2% to $6.9 billion, despite an 8.7% rise in China’s total foreign investments. The US now accounts for just 2.8% of China’s overseas investment stock. While existing Chinese corporate holdings remain untouched, businesses planning expansions in the US now face major obstacles.
Analysts suggest that this shift reflects not only a short-term reaction but also China’s long-term plan to reduce economic reliance on the US. If tensions persist, Beijing may redirect investments to more favorable markets in Asia, Africa, and Europe.
US – China Trade Tensions Escalate
China’s investment restrictions coincide with Trump’s April 2, 2025, announcement of new tariffs. His plan includes a 10% blanket import tax and steeper tariffs on countries with large trade surpluses. China now faces a total 54% tariff, which combines a newly added 34% duty with an existing 20% charge. The EU and Japan also face higher tariffs of 20% and 24%, respectively.
Trump’s administration claims these tariffs protect American industries and workers. However, experts argue they will increase inflation and provoke retaliatory trade measures. As both nations take increasingly aggressive stances, the risk of an extended trade war grows.
By restricting US bound investments, China signals its willingness to strike back economically. Cutting capital flows raises the stakes in the trade battle with Washington, further complicating global economic relations.