As Donald Trump and Xi Jinping prepare for a high-stakes meeting at the White House, the shadow of the Iran conflict looms large. With billions of dollars already spent and no clear end in sight, Washington is searching for ways to contain a crisis that threatens to destabilise the wider Middle East. This raises an important question: why is China central to the conversation?
Although Beijing is not directly involved in the conflict, it wields considerable economic and diplomatic influence over Tehran. At a time when the costs of war are mounting, and Iran continues to withstand sanctions and military pressure, China could play a critical role in shaping the conflict’s trajectory. The summit may ultimately reveal how much the United States needs the cooperation of its biggest strategic rival.
Cost Of Iran War For The US
The financial burden of the Iran war continues to grow. According to a new estimate provided to lawmakers, the cost of US military operations had reached $43.6 billion as of September 3, 2026, up from the Congressional Budget Office’s estimate of $38 billion as of August 1. The spending includes the replacement of expended munitions, equipment lost in combat, increased flying hours, operational expenses and higher fuel costs. The estimate does not include costs borne by other federal agencies or routine military expenses already accounted for in the federal budget. (Congressional Budget Office)
The CBO warned that the costs could continue climbing if the conflict drags on. It estimated that if violence remains at the relatively low levels seen in May and June, each additional month of conflict would cost about $2 billion. If the fighting intensifies to levels seen in July, the monthly price tag could rise to $3 billion. As Washington grapples with a rapidly expanding war bill, another question naturally emerges: how is a heavily sanctioned country such as Iran managing to sustain a prolonged conflict?
Is China Behind Iran’s Economic Endurance?
Part of the answer lies in China’s deep economic relationship with Iran. The United States views China as Iran’s largest oil customer, biggest trading partner and one of the key reasons Tehran has been able to withstand years of sanctions. According to the US-China Economic and Security Review Commission, China enables Iran to mitigate global sanctions through trade and financial networks, technology transfers and dual-use commerce. The commission says Chinese banks, intermediary firms and front companies facilitate Iranian oil transactions, support the shadow fleet used to transport Iranian crude, provide access to controlled technologies linked to missile and drone programmes, and help move money through international financial channels.
The scale of the relationship is striking. Around 90 per cent of Iran’s oil exports are estimated to go to China, while oil sales tied to China account for roughly 45 per cent of Iran’s government budget. Iran reportedly earned $31.2 billion from oil sales to China in 2025, while total bilateral trade reached $41.2 billion.
China has also pledged $400 billion of investment in Iran over 25 years, and hundreds of Chinese and Hong Kong-based entities have been linked to Iranian sanctions-evasion networks. Together, these figures help explain why Iran has been able to maintain economic resilience despite sanctions and wartime pressures. They also explain why Washington may increasingly look to Beijing if it hopes to influence Tehran’s behaviour.
Rising Fuel Inflation In The US
The impact of the conflict is not limited to the battlefield. American consumers are also paying a price through higher fuel costs. Disruptions linked to the Strait of Hormuz crisis have tightened global energy supplies and contributed to a surge in gasoline prices. Since the Iran war began in February 2026, annual gasoline inflation in the United States has ranged between 18 per cent and 41 per cent, according to the US Bureau of Labor Statistics.
Such levels of fuel inflation have been rare over the past two decades. Similar spikes were seen only during the oil market recovery following the 2008 global financial crisis, the post-pandemic supply crunch in 2021 and the energy shock that followed Russia’s invasion of Ukraine in 2022. The latest surge underscores how instability in the Middle East can quickly translate into higher costs for American households, adding to the economic pressure created by the war itself.
US Trade Deficit With China At A 16-Month High
The economic backdrop to the Trump-Xi meeting presents another contradiction. Washington has spent years trying to reduce its dependence on Chinese imports by shifting supply chains to alternative markets. Yet despite those efforts, trade data suggests that economic ties between the two countries remain strong.
In July 2026, the US imported $27.07 billion worth of goods from China while exporting $9.71 billion, resulting in a trade deficit of $17.36 billion, the highest level in 16 months, according to the US Census Bureau. (Census.gov)
The annual US trade deficit with China stood at $202.67 billion in 2025. The figures highlight a difficult reality for policymakers: while Washington may be seeking alternatives to Chinese supply chains, China remains deeply integrated into the American economy. This economic interdependence adds another layer of complexity to any attempt to pressure Beijing even as the US seeks its assistance on issues such as Iran.
Meanwhile, Xi Jinping’s visit to the White House marks his first state visit in more than a decade, underscoring the significance both sides attach to the relationship. The White House says Xi will be hosted for an official state visit on September 24, more than a decade after his last visit to the White House. (The White House)
Yet the summit comes amid persistent tensions over trade, technology, security and Taiwan. Iran is also expected to be a sensitive issue, with Washington pressing Beijing over its economic and other links with Tehran. (Reuters)
Ahead of the meeting, China’s ambassador to the United States warned that Taiwan and human rights remain “red lines” that Washington must not cross.
