China Sanctions U.S. Defense Companies Northrop Grumman, Boeing, Anduril

 China's government sanctioned 20 U.S. companies and 10 individual executives in the defense sector as retaliation for a large-scale arms sale to Taiwan.

Among the companies included are several top defense contractors such as Northrop Grumman (NOC), L3Harris Technologies' (LHX) naval division, Boeing's (BA) defense arm, Leidos (LDOS) subsidiary Gibbs & Cox and the aerospace logistics contractor VSE Corporation (VSEC). China also sanctioned several smaller, tech-forward firms such as the drone maker Red Cat Holdings (RCAT) and the privately held defense startup Anduril Industries.

All these companies had their Chinese assets frozen and are no longer able to do business in China. The list of Chinese sanctioned individuals included Anduril founder Palmer Luckey and VSE CEO John Cuomo.
The U.S.'s 'One China Policy'

The move is largely symbolic because U.S. defense contractors do very little business in China. However, the move does point to additional tensions between the U.S. and China over the question of Taiwanese independence. China does not considers the democratically governed island of Taiwan as an independent country, but rather as a province under its national jurisdiction. The U.S. has held a "one China policy," since it began diplomatic relations with the country in 1979.

However, the U.S. is reportedly against any armed intervention or invasion from Beijing against Taiwan.

Last week the U.S. government approved a $10 billion arms sale to Taiwan that included drones and medium-range missiles. If Congress approves the package, it will be the largest such sale to Taiwan in U.S. history. The Chinese government said the deal was a "provocation" that interfered in an internal, domestic matter, according to a spokesperson for the Foreign Ministry.

The U.S. should "stop the dangerous moves of arming Taiwan, stop undermining peace and stability in the Taiwan Strait, and stop sending wrong signals to 'Taiwan independence' separatist forces," the spokesperson said on Friday.

China considers Taiwan a renegade province, but has stopped short of any full-fledged military intervention.
Escalating China-Taiwan Tensions

Luckey, the Anduril founder, said his company under the assumption that China might "move on" Taiwan in 2027, according to comments he made on the "Joe Rogan Experience" podcast. That belief led Anduril to speed up its timelines so that weapons systems it is developing would be ready by 2027.

"Imagine how stupid I'll feel if I spend hundreds of millions of dollars building some new weapon system that I know is not going to come into service until the 2030s, which is what most experts say is outside of the window of when this invasion would happen," Luckey said. "Wouldn't I feel pretty stupid if there's a gigantic fight and I've spent all my money on something that wasn't ready in time?"

Luckey did add that his view might not pan out.

Anduril is a relatively new entrant in the defense industry. The defense business has a reputation for being capital intensive and relying heavily on government connections needed to win federal contracts. Those two factors make it a hard business to break into. However, the U.S. military is starting to change the process for how, and from whom, it solicits bids federal contracts. In President Donald Trump's second term the Pentagon has closer ties to Silicon Valley defense startups, in addition to the major prime military contractors.
Defense Stocks

Shares of defense companies rose this year, in the aftermath of Trump's return to the White House and escalating geopolitical tensions. Of the companies included in China's sanctions list Northrop Grumman is up 25% in 2025, Leidos 30%, L3 Harris 40%, and the more service-oriented VSE rose close to 90%.

Some of the top performing stocks of the year are major military contractors from the U.S. and its allies. For example, in 2025 GE Aerospace (GE) and the largest naval warship builder Huntington Ingalls (HII) are both up just a hair under 90%. Meanwhile, the German weapons manufacturer Rheinmetall (RNMBY) is up around 185% and Elbit (ESLT), Israeli defense company specializing in drones, is up 125% year to date.

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