The U.S. Defense Department has added two prominent Chinese companies, CATL (Contemporary Amperex Technology Co. Ltd.), the world’s largest electric vehicle (EV) battery maker, and Tencent Holdings, to its annual list of companies alleged to have ties to China’s military. This move, published in the Federal Register on Monday, has raised tensions between the U.S. and China just two weeks before President-elect Donald Trump takes office. Both companies have rejected the designation, calling it a “mistake.”
Tencent, known for its popular WeChat app, vowed to initiate a reconsideration process and pursue legal action if necessary. CATL, which supplies batteries for major automakers, including Tesla, denied involvement in any military-related activities despite U.S. lawmakers’ calls for the Pentagon to include the company on the list throughout 2024.
Impact on Ford’s Michigan battery plant
The designation of CATL has implications for Ford Motor Company, which is building a battery plant in Marshall, Michigan, scheduled to begin production in 2026. Ford also plans to license CATL’s lithium-iron-phosphate battery technology to manufacture low-cost batteries at the facility. With a controversial $3.5 billion investment, the project has already seen significant reductions in jobs and tax credits, sparking concerns among local lawmakers.
However, the automaker has emphasized that the Marshall plant will be a Ford-owned facility staffed by Ford employees, with no direct involvement from the Chinese government. Despite the Pentagon’s move, Ford’s stance remains that licensing CATL technology to produce batteries domestically is crucial for strengthening U.S. manufacturing and reducing dependence on Chinese imports.
On the other hand, U.S. Representative John Moolenaar (R-Michigan), who chairs the House Select Committee on China, expressed support for the Pentagon’s decision, arguing that the addition of CATL and Tencent to the list is crucial for safeguarding U.S. security and economic interests. He stated, “We cannot allow these loaded guns to threaten our economy and security.”
Experts in U.S.-China relations warn that American firms conducting business with these Chinese companies could face significant reputational and legal risks. Moreover, Craig Singleton, a China expert at the Foundation for Defense of Democracies, called the Pentagon’s actions a warning to U.S. entities, saying that it is “reckless” to engage with companies now linked to China’s military.
The Pentagon’s updated list now includes 134 companies, including other Chinese entities like drone maker Autel Robotics and shipping giant COSCO Shipping Holdings. The list, formally known as the “Section 1260H list,” is part of ongoing U.S. efforts to restrict Chinese companies perceived as security risks. While the designation does not immediately lead to sanctions, it sends a strong message that could influence future actions by the U.S. Treasury Department.
The Chinese government has strongly condemned the move, labeling it an “illegal unilateral sanction” and demanding immediate reversal. This escalation highlights the ongoing friction between the two largest global economies, with the U.S. using the list to signal concerns about Chinese influence in critical sectors.
