CNBC Daily Open: Trump's ‘little excursion’ becomes an uphill battle as Iran war continues

The Trump administration's recent "economic D-Day" against Iran, announced by US Treasury Secretary Scott Bessent, aims to sever Iran's economic lifelines. Iran's largest lifeline, China, receives some estimates suggesting that around 90% of Iran's oil is shipped there through shadow fleets. China also offers access to the Cross-Border Interbank Payment System (CIPS) and has seen a rise in its daily transfer volumes since the Iran war began.

Despite China's potential to be impacted, Beijing appears unalarmed by the US pressure campaign. The Chinese foreign ministry labeled the announcement as "illegal" but went no further, while a Chinese analyst called it an "act of helplessness." Some private Chinese media outlets noted the vagueness and slow pace of the new US sanctions. However, China has previously warned of retaliation if the US targets its companies, and President Xi Jinping acknowledges the country's retaliatory capabilities.

China's most potent tool is its ability to impose sanctions on rare earth exports, which could significantly disrupt US manufacturing, particularly in the defense sector. While the US has been developing alternative supply chains, it has struggled to reduce its reliance on China.