China’s Iran problem: Why Trump’s sanctions strategy could put Beijing in a bind

The Trump administration’s campaign to squeeze Iran’s economy is running into a major complication: China. US Treasury Secretary Scott Bessent has expanded Washington’s use of economic pressure against Tehran, including secondary sanctions aimed at companies, banks, traders and other entities helping Iran maintain its economic lifelines. The strategy is designed to make doing business with Iran increasingly costly even for entities that are outside the United States.

But there is one country Washington cannot easily ignore, China. China is Iran’s largest trading partner and by far its biggest buyer of crude. The US-China Economic and Security Review Commission says Chinese purchases accounted for roughly 90 per cent of Iran’s exported oil, while China imported nearly 1.4 million barrels per day of Iranian oil in 2025. That makes Beijing crucial to Tehran’s ability to keep earning revenue despite years of US sanctions.

Why China's role matters

Iran has spent years developing ways to keep its oil flowing despite sanctions. Chinese buyers, trading networks, financial intermediaries and shipping arrangements have become an important part of that system. A US-China Economic and Security Review Commission timeline published this month described China as Iran’s ‘most important economic lifeline’, particularly through oil purchases. It also highlighted Chinese involvement in trade and technology networks that have helped Tehran mitigate the impact of sanctions.

For Beijing, however, the relationship with Tehran is not simply about supporting Iran. China gets access to discounted Iranian crude, while Iran gets a major customer willing to continue buying despite US restrictions. The relationship therefore serves economic interests on both sides. But Beijing also has much larger commercial interests with other Middle Eastern economies, including Saudi Arabia and the United Arab Emirates. The USCC estimates that China’s two-way trade with both Saudi Arabia and the UAE was significantly larger than its trade with Iran in 2025.

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What are secondary sanctions?

Primary US sanctions generally restrict American individuals and companies from doing business with a sanctioned country or entity. Secondary sanctions go further. They can threaten non-US companies or financial institutions with losing access to the US financial system if they continue certain transactions with sanctioned entities. That creates a difficult choice for international businesses: maintain commercial ties with Iran or protect access to the US financial system. Bessent’s expanded sanctions campaign has already targeted entities in China and Hong Kong linked to Iran’s oil, missile and nuclear-related activities.

Why China is different

Targeting smaller companies or financial networks is one thing. Applying maximum pressure to China is much more complicated. China is the world's second-largest economy and one of Washington's most important economic counterparts. At the same time, Trump and Chinese President Xi Jinping are preparing for talks in Washington covering trade, technology, AI and other strategic issues.

That creates a balancing act for Washington. The US wants to reduce Iran's ability to finance its economy and war effort. But aggressively targeting major Chinese companies or banks could trigger another confrontation with Beijing just as Washington is trying to stabilise US-China relations. China has already rejected unilateral US sanctions on Iran and defended its trade relationship with Tehran.

What happens next?

The central question is not whether Washington can sanction Chinese entities. It can. The bigger question is how far the Trump administration is willing to go against Chinese companies that continue buying or facilitating Iranian oil. If Washington increases pressure, Beijing could respond politically or economically. If enforcement remains limited, Iran could continue relying heavily on Chinese demand for its oil. That leaves China at the centre of Trump's Iran strategy, not necessarily because Beijing is the intended target, but because Iran's economic lifeline increasingly runs through a country Washington also needs to negotiate with.