Chinese Firms Bypass US Tariffs Via Investments in American Companies

Chinese companies are investing in US firms to avoid tariffs and gain access to American taxpayer money for advanced technology. These investments keep Chinese ownership below a 25% limit, letting them claim subsidies meant for domestic producers. This practice has grown as China faces stricter trade barriers from the US.

Background

China hit a record trade surplus of $1.2 trillion in 2025, giving it a huge cash pile from exports. US tariffs under past administrations aimed to protect American industries like electric vehicles, solar panels, and semiconductors. But Chinese firms found a way around them by setting up or buying stakes in companies on US soil.

These moves target key areas such as energy projects, gas pipelines, data centers, and high-tech factories. Chinese state lenders lead the effort, using loans and other financing to hide true ownership levels. The US has become the top spot for this kind of Chinese money in recent years.

Rules from Congress label certain foreign companies as 'Foreign Entities of Concern,' or FEOC. These include firms tied to China, Russia, North Korea, or Iran. The goal is to stop them from getting federal funds or tax breaks for sensitive tech. A 25% ownership cap sets the line for equity stakes in US companies.

Key Details

Chinese investors keep their direct ownership under 25%, but they hold real power through other means. They license technology, supply key parts, provide financing, and place managers in charge. This setup lets US-based firms qualify for subsidies from laws like the Inflation Reduction Act, the 45X credit, 48E tax breaks, and the CHIPS Act.

How the Bypass Works

Take a typical deal: A Chinese group buys a factory in the US Midwest for battery production. They take a 24% stake to stay under the limit. Then they sign contracts for exclusive supply of raw materials from China and tech know-how from Beijing labs. Chinese loans cover most costs, and executives from the parent company run daily operations.

This factory now looks American on paper. It gets millions in grants and tax credits from US programs. Taxpayers foot those bills, while the plant ships products that feed China's global supply chains. Similar patterns show up in solar cell makers and chip foundries across states like Texas and Arizona.

US officials have spotted this in sectors hit by trade probes. For example, investigations into solar imports found Chinese government aid as high as 117% of production costs. Firms reroute cells through US plants to dodge duties. Energy deals follow the same play: Chinese cash builds pipelines, but control stays with Beijing.

"Chinese entities are entering critical US supply chains through influence rather than outright ownership." – Industry analyst familiar with the deals

Data shows dozens of such projects since 2023. One cluster in Nevada involves data centers powered by Chinese hardware. Another in Ohio ties to EV parts. Total subsidies claimed run into billions, based on public award lists.

What This Means

American workers and companies lose out when subsidies go to operations under foreign sway. Plants marked as domestic rely on Chinese parts and decisions, weakening US goals for self-reliance in tech. Tariffs lose bite as production shifts stateside but stays linked to Beijing.

Treasury holds power to fix this without new laws. It can expand FEOC rules to cover any Chinese influence via tech deals, supplies, loans, or staff. This would cut off subsidies and block risky investments in security-sensitive fields.

Lawmakers push bills like the Biosecure Act to limit biotech ties and the FIGHT China Act for broader trade tools. A State Department list could vet foreign cash in industries under trade watch, like steel and autos.

Without changes, China keeps growing its reach. Its firms pour money into catching up on planes, chips, and AI. US programs meant to build homegrown strength end up funding rivals. Stronger enforcement could shift investments to pure American outfits, spurring jobs in real domestic factories.

Trade teams watch deals closely now. Recent probes into solar and batteries show duties matching subsidy levels, up to 117%. But investment routes slip through. Closing them protects the system taxes built.