China Invokes “Blocking Statute” Framework Ahead of Trump–Xi Summit

In advance of the May 14–15 meeting between President Donald Trump and President Xi Jinping in Beijing, senior U.S. and Chinese economic officials previewed legal and regulatory authorities they would consider leveraging in the event of an adversarial resolution to the summit.

At the core of the dispute is China’s expanded use of its “blocking statute” regime—a set of rules designed to counter the extraterritorial application of foreign laws, particularly U.S. sanctions, export controls and trade restrictions. U.S. officials and U.S. trade associations have warned that if these changes go into effect, American companies would be penalized for complying with U.S. measures aimed at supply chain diversification, especially in critical minerals and advanced manufacturing sectors.

These concerns were amplified by a May 2, 2026, announcement by China’s Ministry of Commerce (“MOFCOM”) issuing Announcement No. 21 of 2026, prohibiting Chinese compliance with U.S. oil‑related sanctions imposed on five Chinese petrochemical companies, finding the measures to be an improper extraterritorial application of U.S. law. This development materially raises the stakes for the Trump–Xi meeting, shifting the agenda beyond tariffs and trade balances toward a more fundamental conflict over whose laws govern multinational companies operating across borders. The move emphasizes the importance of having a post-summit plan, being aware of the potential risks and preparing strategies to protect industry interests under the framework that comes from the conference.

The Development: China’s Blocking Statute as a Legal Countermeasure

MOFCOM’s Announcement No. 21 marks a significant escalation in the application of China’s blocking statute framework. MOFCOM concluded that recent U.S. oil‑related sanctions designating five Chinese petrochemical companies on the U.S. Specially Designated Nationals (“SDN”) List—imposed pursuant to executive orders 13902 and 13846 for alleged Iranian oil transactions—constitute an improper extraterritorial application of U.S. law. Acting under the Chinese Measures to Block the Undue Application of Foreign Laws and Measures, MOFCOM ordered that entities and individuals within China must not recognize, enforce or comply with the relevant U.S. sanctions, including associated asset‑freezing and transaction prohibitions. The prohibition took effect immediately, underscoring that China’s blocking statute has evolved from a largely theoretical tool into an actively enforced legal mechanism with direct implications for multinational sanctions and compliance programs.

China’s Ministry of Commerce has increasingly relied on its “Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures” (commonly referred to as China’s “blocking statute”) to respond and blunt U.S. trade and sanctions policy. These rules empower Chinese authorities to:

• Prohibit companies from complying with specified foreign laws deemed to be unjustifiably extraterritorial;
• Expose companies to civil liability in China for losses caused by compliance with such foreign measures; and
• Authorize government-supported legal remedies against firms that follow U.S. restrictions at China’s expense.

U.S. Treasury Secretary Scott Bessent publicly criticized China’s latest regulations as a “provocative” expansion of this framework, warning that they could chill global supply chains by forcing companies to choose between U.S. law and access to the Chinese market. If maintained for the long term, this move represents a significant escalation, transforming what had previously been a largely symbolic legal tool into an active deterrent against supply chain diversification away from China.

American countermeasures, including tariffs, export controls and technology restrictions, provide the Trump administration with bargaining chips to dissuade the Chinese from continuing this policy or expanding it to other industries. Any side negotiations involving these trade controls should be watched before, during and after the countries’ leaders meet.

Why the Blocking Statute Matters for the Trump‒Xi Agenda

A Shift from Tariffs to Legal Conflict

Past U.S.–China summits have focused heavily on tariff levels and purchase commitments. By contrast, the blocking statute dispute moves the conversation into direct legal conflict over jurisdiction and compliance obligations. Unlike tariffs, blocking statutes force companies into immediate operational dilemmas—compliance with one legal regime may constitute a violation of another. Watch for President Trump to clarify the risk faced by American companies, while harnessing U.S. trade policy to discourage Chinese legal and regulatory enforcement.

Supply Chain “Decoupling” Becomes a Legal, Not Just Economic, Issue

China’s invocation of its “blocking statute” directly targets U.S.‐led efforts to encourage “China‑plus‑one” sourcing strategies. By threatening legal consequences for compliance with U.S. restrictions—particularly in areas such as critical minerals—China is converting supply chain diversification into a high‑stakes legal risk decision between the American and Chinese markets. This risk elevated recently as Secretary of State Marco Rubio declared the United States would enforce secondary sanctions on industry members that continue business under the Chinese “blocking statute.” Which organizations, if any, are targeted after this announcement will provide insight into how the Trump administration will enforce its current sanction framework.

This makes it likely that the Trump‒Xi meeting will address:

• Guardrails around retaliatory legal enforcement;
• Possible carve‑outs or informal understandings for multinational firms; and
• Mechanisms to prevent disputes from cascading into third‑country supply chains.

Most observers expect these issues to be managed, not resolved, reinforcing the view that the summit will focus on containment rather than reconciliation.

Blocking Statutes as Strategic Leverage

It also serves as a counterbalance to recent American action, including new Section 301 and 232 investigations and congressional pressure to reexamine Chinese export restrictions on products including semiconductors. China’s “blocking statute” also strengthens Beijing’s negotiating position going into the Trump‒Xi meeting by signaling that it possesses tools that can directly disrupt U.S. policy objectives without resorting to tariffs or broad export bans.

Implications for Companies

• Heightened compliance risk: Companies may face conflicting legal obligations under U.S. law and Chinese blocking rules.
• Increased enforcement uncertainty: The scope and timing of China’s application of its blocking statute remain unpredictable.
• Leader‑level stakes: Because these issues now implicate sovereignty and legal authority, resolution is unlikely below the presidential level.
• Implementation ambiguity: Potentially complicate prioritization of other issues that could deescalate tensions between the United States and China, especially as it is not clear what actions are designed for negotiation or implementation.

Outlook

China’s active deployment of its “blocking statute” marks a turning point in U.S.–China economic relations, transforming trade tensions into a struggle over legal jurisdiction and corporate obedience. This development all but guarantees that the Trump–Xi meeting will prioritize supply chain control, sanctions compliance and regulatory sovereignty over traditional tariff bargaining, though these issues are still likely to be addressed.

This underlying conflict over extraterritorial law is likely to persist well beyond the summit. Industry leaders should start to prepare a strategy on how to protect their interests and engage on trade issues beyond the May meeting. Brownstein will continue to track and analyze potential policy and regulatory developments through multiple political and administrative channels in the lead up to and conclusion of the Trump‒Xi discussions, including on any new action around the “blocking statute.” Please reach out to the authors of this alert if you have any questions on how our team can work towards your international business goals.

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THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING CHINESE TRADE CONTROLS IN THE LEAD UP TO THE TRUMP-XI SUMMIT. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.