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

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U.S. President Donald Trump with Chinese President Xi Jinping. File | Photo Credit: Reuters

The “economic onslaught” that Treasury Secretary Scott Bessent has declared on Iran's financial connections around the world may have one major caveat, says 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 is also preparing to host Chinese leader Xi Jinping next month to maintain a fragile trade truce.

Absent from Mr. 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 Centre for Strategic and International Studies, said on Tuesday (August 26, 2026).

“For Mr. Xi, a state visit to Washington is a big deal; and for Mr. Trump, hosting it is a big deal.” That means both Washington and Beijing will have a dance to do, said Mr. 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 Mr. Bessent announced on Monday (August 24), 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 safeguard its own rights and interests resolutely,” Mr. Lin said. He repeated China's opposition to “illegal unilateral sanctions." Mr. 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 to cross explicit red lines, but they haven't addressed the spirit of what the U.S. has sought,” Mr. 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 Centre, a Washington think tank, said China will not go along with the new campaign if the U.S.