Beijing Escalates Trade Conflict: Sanctions Hit S. Korea's Hanwha Ocean Amid Rare Earth and Shipping Disputes

China’s Ministry of Commerce announced on Tuesday that it had imposed sanctions on five subsidiaries of Hanwha Ocean connected to the United States, escalating trade and commercial tensions between Beijing and Washington. The measure bars Chinese companies and individuals from conducting business with the listed Hanwha divisions, triggering a sharp fall in the South Korean shipbuilder’s share value.

According to the ministry, the sanctioned Hanwha entities had supported U.S. government investigations that China claims threaten its national security and development interests. Following the announcement, Hanwha Ocean’s stock declined by nearly six percent, while shares of competitor HD Hyundai Heavy Industries also dropped. South Korea’s foreign ministry confirmed awareness of the sanctions and stated it was consulting with both Beijing and other stakeholders to assess their impact.

The move comes amid a broader maritime dispute between the world’s two largest economies. On the same day, both nations implemented reciprocal surcharges on each other’s vessels, a development linked to earlier U.S. efforts under the Trump administration to strengthen domestic shipbuilding through new port fees. China’s timing drew attention, given Hanwha Ocean’s recent U.S. investments—including the 2024 purchase of Philly Shipyard for $100 million and an additional $5 billion expansion plan announced in August. These projects align with a larger South Korean initiative to channel up to $150 billion into American shipbuilding ventures.

In addition to the shipping dispute, Beijing has been defending its recent restrictions on rare earth exports—critical materials used in defense technologies and advanced electronics. The Commerce Ministry characterized these export controls as a legitimate measure intended to protect national interests. The policy initially prompted former U.S. President Donald Trump to threaten the cancellation of a scheduled meeting with Chinese President Xi Jinping, though the American position has since moderated. Reports indicate that since September, Chinese producers of rare earth magnets have faced tighter scrutiny when applying for export permits, contributing to a more than 30 percent decline in China’s rare earth exports that month.

Despite these escalating economic measures, Beijing emphasized that it remains open to dialogue. The ministry confirmed that lower-level discussions with U.S. representatives have recently taken place. Vice Finance Minister Liao Min, a key member of China’s trade negotiation team, is currently in Washington for meetings with officials at the U.S. Treasury Department. Even so, Chinese authorities warned that Washington cannot expect constructive talks while continuing to issue new punitive measures. The latest actions from both sides have heightened uncertainty in global markets and further complicated prospects for a quick resolution to the trade dispute.