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The US has halted plans to impose sanctions on China’s Ministry of State Security over a massive cyber espionage campaign in order to avoid derailing the trade truce President Donald Trump and President Xi Jinping struck in October.
Current and former US officials said plans to impose sanctions on the spy agency — and contractors it is allegedly using to conduct a hacking campaign against US telecom networks called “Salt Typhoon” — were put on hold to avoid undermining the US-China détente.
The administration will also not enact major new export controls against China following the deal reached in the South Korean city of Busan, according to several US officials and others familiar with the situation.
Several people said the goal of the Trump administration’s China policy had shifted to ensuring “stability” until the US reduces China’s dominance in rare earths, which has hamstrung its ability to take aggressive actions. Trump also does not want to jeopardise his visit to Beijing in April.
But the decision not to impose sanctions over Salt Typhoon, which has successfully targeted the unencrypted communications of top US officials, has sparked frustration among China hawks in the government who think Trump is sacrificing national security for trade deals.
“The administration appears to be giving ground on export controls in order to secure President Trump’s trip to Beijing and buy time to diversify critical mineral reliance away from China,” said Zack Cooper, an Asia security expert at the American Enterprise Institute. “I worry that this is simply concessions masquerading as strategy.”
In another move that has triggered concern among China hawks, the administration is preparing to hold a high-level meeting to decide whether to provide licences to allow Nvidia to export the H200, an advanced chip, to China, according to people briefed on the situation.
Ahead of the October summit with Xi, Trump had suggested that he might let Nvidia sell an even more advanced chip called the Blackwell to China, but his advisers convinced him not to make that decision.
In recent weeks, the administration has bolstered China policy co-ordination by tasking Stephen Miller, deputy White House chief of staff, with ensuring that departments do not take actions that could threaten the détente, according to two people briefed on the development.
Miller was given the role after Treasury secretary Scott Bessent complained that he had been blindsided by a White House memo that raised concerns about Alibaba, the Chinese tech group. The Financial Times first reported the existence of the memo.
The memo, which was based on declassified intelligence, said Alibaba was supporting Chinese military operations targeting the US. Alibaba strongly rejected the claims.
Treasury and the White House did not comment on the decision to halt planned sanctions on the MSS.
But one source familiar with the White House’s thinking said Trump was “committed to ushering mutually beneficial trade relations with China without compromising on our national and economic security”.
“The administration’s rigorous export control regime, including on state-of-the-art Blackwell chips, remains in place, while China has agreed to crack down on fentanyl precursors, purchase US agricultural products and keep rare earths flowing,” the person said.
Earlier this year, Jake Sullivan, who was national security adviser in the administration of President Joe Biden, told the FT that Salt Typhoon was “unique” in terms of its scale. In addition to accessing the phones of senior officials, he said the MSS was penetrating every major US telecoms provider and “picking any phone they wanted to listen to”.
China has denied that the MSS has hacked into US telecom networks.
One person familiar with the situation said the US government and telecom companies had made very little progress towards stopping Salt Typhoon.
Michael Sobolik, a US-China relations expert at the Hudson Institute, said the administration was sending a clear message that it wanted to protect the Busan truce and that security actions were “on ice” for now.
“Xi has a history of breaking promises to American presidents, and the Chinese Communist party has a track record of exploiting negotiations to buy time strategically,” he added. “President Trump needs to look out for this trap.”
