US halts plans to sanction China's spy agency in a bid to maintain trade truce: Report

The United States has halted its plans to impose sanctions on China’s Ministry of State Security over a massive cyber espionage campaign in a bid to avoid the derailing of trade talks between the two economic giants. Current and former US officials told The Financial Times that the plan to impose sanctions was “put on hold” to avoid undermining the US-China détente.

Initially, the US was planning to sanction the Chinese spy agency and contractors it is allegedly using to conduct a hacking campaign against US telecom networks called “ Salt Typhoon ”. While Washington is going to lose on the sanctions, US President Donald Trump’s administration is also planning to enact major new export controls against China following the deal reached in the South Korean city of Busan.

According to the Financial Times, several people said that 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 warms to China ahead of his visit

The officials also noted that Washington is going soft on China because Trump does not want to jeopardise his visit to Beijing in April. However, 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 within the Trump administration.

“The administration appears to be giving ground on export controls to secure President Trump’s trip to Beijing and buy time to diversify critical mineral reliance away from China,” Zack Cooper, an Asia security expert at the American Enterprise Institute, told FT. “I worry that this is simply concessions masquerading as strategy.”

Another move that triggered the American China hawks was the decision to hold a high-level meeting to decide whether to provide licences to allow Nvidia to export the H200, FT reported. Back in October, Trump 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.

Not only this, in recent weeks, the Trump 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, two sources told FT. Interestingly, Miller was given the role after the US Treasury Secretary Scott Bessent complained that he had been blindsided by a White House memo that raised concerns about Alibaba, the Chinese tech group.

Overall, it will be interesting to see if the Trump administration’s soft approach towards China helps in trade talks between the two nations.