China vows payback for US Iran sanctions, testing stability ahead of Xi-Trump summit

Beijing has vowed to retaliate against Washington’s expanded Iran sanctions targeting Chinese entities, threatening a clash that could erode recent stability in the US-China relationship and become a new flashpoint weeks before President Xi Jinping visits the US, according to observers.
But they say that efforts on both sides, such as this week’s Track 1.5 dialogue, could serve as a check on tensions and allow each side to understand the other’s concerns.
The US on Monday announced fresh sanctions against Iran and its trading partners, including entities in mainland China and Hong Kong, in its latest push to squeeze Iran economically after months of military strikes and diplomatic talks failed to resolve the six-month conflict.

On Tuesday, Chinese foreign ministry spokesman Lin Jian dismissed the sanctions as “illicit” with “no basis in international law”, saying the US move would heighten tensions and disrupt the global economic and financial order.
“Economic warfare and maximum pressure provide no solution,” he said. “China’s cooperation with Iran is conducted within the framework of international law, thus should not be disrupted.”
Sun Chenghao, a fellow at Tsinghua University’s Centre for International Security and Strategy, said it was not clear if the latest sanctions would directly affect Xi’s planned meeting with Trump but that the sanctions development was “becoming a new risk point” ahead of the summit.
“The key may lie in whether the US expands secondary sanctions to major Chinese banks. If it’s limited to individual companies and intermediaries, both sides may still be able to keep the disagreement contained,” he said. “But if it touches China’s core financial institutions, the situation could become quite different.”
Xi is expected to visit Washington next month – his first state visit to the US in more than a decade – for talks with Trump.
Sun said that if the US doubled down on its secondary sanctions on Iran to target key Chinese financial firms, the summit risked becoming an exercise in “damage control” rather than a platform to promote stability and produce results, which would be a setback to the “hard-won momentum of stability” in US-China ties.
Song Guoyou, deputy director of Fudan University’s Centre for American Studies, said the latest US move exposed Washington’s dilemma. On one hand, the ongoing conflict with Iran was causing serious problems at home, pushing the Trump administration to escalate pressure on Tehran.
But on the other hand, its relationship with Beijing mattered too, he added, suggesting that the US was unlikely to risk large-scale sanctions against China.
“This is because the Sino-US trade war that began last year has proven that no matter what kind of sanctions the US adopts, including secondary sanctions on Iran, it cannot truly make China back down,” he said.
According to Song, the US sanctions could “indeed become a significant new factor affecting Sino-US relations”.
“China will certainly defend its economic interests, and in a legitimate and reasonable manner. Therefore, in future Sino-US interactions, the Iranian issue and the US economic sanctions against Iran … will become a new uncertainty,” he said.

The two sides have in recent weeks traded tit-for-tat measures that analysts earlier said could cloud the Chinese leader’s landmark visit to the US.
Washington last month added dozens of Chinese firms to its Uygur Forced Labour Prevention Act entity list and banned the import and sale of new foreign-made robotic devices and power inverters – sectors in which China is a global leader – prompting retaliatory sanctions from Beijing days later.
Zhu Junwei, director of Chinese think tank Horizon Insights Centre, said Washington’s moves were likely aimed at building up bargaining chips ahead of next month’s summit. She said they were unlikely to derail the summit itself but could shape its outcomes.
But even with signs of rising tensions, observers say recent dialogue could help soothe some concerns between the two sides.
Beijing on Tuesday hosted the third US-China Track 1.5 Dialogue, a semi-official mechanism established in 2023 to bridge official diplomacy and non-governmental exchanges between the two countries.
Liu Haixing, head of the Communist Party’s International Department, told attendees – Chinese and foreign representatives from local governments, think tanks and universities as well as members of US strategic and business communities – that China and the US should work towards “normal stability with controllable disagreements”.
Zhu said the dialogue was beneficial in keeping lines of communication open between both sides, even though it was not clear how much influence the American attendees had over the Trump administration.
Sun, from Tsinghua University, said such dialogues could serve as a “guardrail” amid escalating tensions but he cautioned against overstating their impact.
“The greatest value of this type of dialogue isn’t to resolve major policy disagreements like sanctions on the government’s behalf, but to help both sides more accurately understand each other’s red lines and policy logic,” he said.
“Especially on an issue like Iran secondary sanctions, the US and China can easily end up with misaligned perceptions … This is where unofficial and semi-official channels can discuss things more candidly.”