Munich, GERMANY — The U.S. is considering slapping sanctions on Chinese companies it believes are helping Russia fuel its war in Ukraine, members of Congress told CNBC, marking the first direct apportioning of blame toward Beijing since the start of the war.

Democratic Senator Gerald Connolly, member of the U.S. House Committee on Foreign Relations, on Saturday said that lawmakers were already considering such plans after similar measures were proposed last week by the European Union.

The provisions would mark the first direct penalties against Beijing despite long-held Western suspicions over its support for Russia’s military operations.

“China has to understand that the same kinds of sanctions which are beginning to really take hold in Russia and are affecting Russian productivity, economic performance and quality of life, can also be applied to China,” he told CNBC’s Silvia Amaro on Saturday at the Munich Security Conference.

“And frankly, China has a lot more to lose than Russia.”

U.S. sanctions could severely hurt a Chinese economy already in the doldrums, after a slower-than-anticipated Covid-19 recovery and turbulence in its real estate sector. But such a step could also hurt the U.S., given the countries’ trade interdependence, and this consideration has prompted caution from Washington in the past.

Still, Connolly said that would not deter such penalties, which could come “very soon.”

“My hope is the very threat of it — and the fact that the Europeans are really serious about this, which is a relatively recent development — ought to clarify some thinking in Beijing, I hope,” he said.

“If broad sanctions were applied to China, it would really hit home. And their economic performance right now is already weak. So I would hope China would calculate carefully that there are consequences around the corner for supporting Russia’s violence and depravity in Ukraine.”

Asked whether the U.S. is considering similar sanctions on China as those proposed by the EU, U.S. Senator Ben Cardin said Congress was currently looking into options with the Biden administration.

“It’s an area that we’re looking at, and Congress is working with the administration as to how we can enforce the sanctions against Russia, and that will require greater cooperation of other countries.”

CNBC reported last week that the European Union was preparing to impose sanctions on Chinese companies it believes are helping Russia circumvent Western penalties intended to curb its war in Ukraine.

The proposals, which would form part of the bloc’s 13th sanctions package since the start of Russia’s full-scale invasion, could be ready later this month to mark the war’s second anniversary. The EU’s top diplomat Josep Borrell said Monday that those plans had gained a new urgency in the wake of the death of Russian opposition leader Alexei Navalny on Friday.

The plans come amid ongoing reports that Beijing is propping up Moscow’s war economy.

A September CNBC investigation found that Chinese firms are playing an critical role in boosting Russia’s military capabilities, including via the trade of goods for use on the battlefield in Ukraine. A separate January report found that China has become key conduit in funnelling critical Western tech into Russia.

China’s foreign ministry and the U.S. National Security Council did not immediately respond to CNBC requests for comment.

A U.S. intelligence report stated that China “has also become an increasingly important buttress for Russia in its war effort, probably supplying Moscow with key technology and dual-use equipment used in Ukraine.”

However, Beijing has been forthright in its rejection of such accusations, saying that its trade with Moscow constitutes “normal economic cooperation,” and that it targets no “third party.” China has also previously attempted to mediate in the war in Ukraine, last year releasing a 12-point peace plan for the conflict that has yet to gain traction.

In a speech at MSC, China’s Foreign Minister Wang Yi said that trade should not be weaponized and said that any attempts to limit trade ties with his country would be a “historic mistake.”

“Those who attempt to shut China out in the name of derisking will make a historical mistake,” he said referring to existing restrictions implemented by the U.S. to limit, for instance, the trade of sensitive technologies.

Wang later met with U.S. Secretary of State Antony Blinken on the side lines of the conference, where he urged Washington to lift existing sanctions on Chinese companies and individuals and said the U.S. should not hurt China’s legitimate development rights.

Washington has imposed sanctions on various Chinese companies that it says are working with China’s military, despite the firms’ denials. U.S. sanctions have also been placed on individuals and entities accused of human rights abuses in the Chinese region of Xinjiang.

A.P. Moller-Maersk, the second-largest global ocean carrier, is advising customers to prepare for a Red Sea crisis that could stretch well into the second half of this year.

“Unfortunately, we don’t see any change in the Red Sea happening anytime soon,” Charles van der Steene, regional president for Maersk North America, tells CNBC. “We’re advising them the longer transit routes could last through Q2 and potentially Q3. Customers will need to make sure they have the longer overall transit time built into their supply chain.”

On January 5, Maersk announced that it was suspending voyages through the Red Sea and Gulf of Aden for the “foreseeable future” after the attack on the Maersk Hangzhou. After attacks on two U.S.-flagged Maersk vessels on January 24, the Maersk Detroit and Maersk Chesapeake, Maersk Line, Limited — a U.S. subsidiary of Maersk, which operates U.S.-flagged vessels independently — announced it would no longer traverse the Red Sea.

The global shipping and logistics company’s cautious view of the Red Sea safety conditions comes despite a U.S.-led multinational military operation in the region, Operation Prosperity Guardian. According to U.S. defense data, Houthi rebels have either attacked or threatened commercial vessels at least 46 times since November. Despite multiple strikes by the U.S. and allies against rebel targets, Houthis have warned that their attacks “will continue until the aggression against Gaza stops.”

The longer transits around the Cape of Good Hope are delaying the arrival of the empty vessels going back to Asia to pick up more U.S. imports. The delays are impacting the consistency of trade which can impact the supply chain. Van der Steene said he is urging U.S. companies to remain vigilant in their assessment of the Red Sea situation and be nimble in their supply chain logistics strategies.

Maersk was the largest ocean carrier for U.S. exports in 2023, based on customs data. Maersk Line, Limited’s U.S.-flagged vessels are enrolled in the Maritime Security Program and VISA (Voluntary Intermodal Sealift) with the U.S. government. It has the largest number of U.S. flagged vessels serving the country, in addition to its foreign-flagged fleet which transports ocean freight for U.S. companies.

“Our advice to our customers is specifically about building upon the uncertainty by being agile,” said van der Steene. “Customers need to have the ability to enter the North American market from different endpoints. Be it the West Coast, Gulf, or the East Coast. Our preparation of services very much depends on one-to-one work with our customers to identify what is their best alternative.”

Data from maritime advisory firm Sea-Intelligence shows that the average delay for late vessel arrivals has “deteriorated,” and as a result, vessel capacity has diminished, with impacts for U.S. East Coast-bound ocean freight from Asia going around the Horn of Cape Hope.

To keep the flow of trade moving, van der Steene told CNBC, Maersk has added about 6 percent of extra vessel capacity to its schedule, adding to operational costs. During its recent earnings call, Maersk executives flagged “high uncertainty” in its 2024 earnings outlook, citing the Red Sea disruptions and an oversupply of shipping vessels.

“U.S. businesses are concerned about delivery timing,” said van der Steene. “Merchant decisions are based on how reliable and how consistent their supply chain will be for the next three, six, 12, 24 months.”

In addition to delivery, van der Steen said shippers need to quantify the cost for their supply chain to the actual costs for their supply chain.

“Many of our customers factor a cost per unit cost for their supply chain into their budgeting, which basically is what they need to make their results work,” he said. “If that fundamentally shifts and changes, it could have a pretty significant effect on their overall costs.”

Ocean freight prices have jumped as a result of the longer voyage, costs not planned in shippers’ budgets, but recent data has suggested that inflation related to the Red Sea may be peaking already. Maersk officials said during its recent earnings call that the situation will not compare to the Covid supply chain inflation period due to the current overcapacity of vessels resulting from a post-Covid freight industry recession.

U.S. companies, van der Steene says, are faced with three supply chain headwinds: Red Sea diversions, East Coast port labor negotiations, and the Panama Canal drought. Shippers are looking for alternatives to cut both the time and rising cost of transit.

Ports in Mexico, the Pacific Northwest, and Los Angeles and Long Beach will be ports receiving some East Coast bound freight, van der Steene said. He described Mexico as a “significant” opportunity due to the expansion of nearshoring of products once manufactured in China. Recent trade data from the U.S. government showed that for the first time in decades, Mexico surpassed China as the nation’s largest trade partner.

For East Coast trade originating from the Oceania (Australia and New Zealand) region and going through the Panama Canal, Maersk recently announced it was expediting freight flow by moving those containers via rail instead of waiting to traverse the canal, which has drought restrictions reducing the number of vessels allowed for daily transit.

“The concern of Panama hasn’t gone away,” said van der Steene. “It has stabilized in the sense that people know what to expect, but we don’t know if this might potentially be recurring on an ongoing basis in the future. As a result, we’re actively looking to potentially have a better West Coast approach that would somehow mitigate the risk of the throughput being reduced on an ongoing basis.”

The World Trade Organization’s director-general warned that the ongoing Israel-Hamas conflict will impact global growth if it spills over to the wider Middle East region.

In an interview with CNBC aired on Monday, Ngozi Okonjo-Iweala said: “If it spreads beyond where it is now, to the rest of the Middle East, there will be an impact.”

“Remember that this region is also the source of a lot of the world’s energy with respect to natural gas as well as oil, which is still very much in use and all over the world. So you will see an impact on global growth, on global trade,” she added.

“We do hope it does not amount to that. We’re praying for de-escalation and peace,” she told CNBC’s Martin Soong on the sidelines of the Group of 7 meeting in Osaka, Japan.

Israel’s military campaign in the Gaza Strip was triggered by the brutal terrorist attack by Hamas militants in southern Israel on Oct. 7 that killed 1,400 people, including Americans. Nearly 240 people have been captured and taken as hostages to Gaza.

Economists have cautioned that any possible escalation of the Israel-Hamas war poses a major disruption to the global economy, and could drive up energy prices and disrupt key trade routes.

Trade growth is already “quite grim” due to the “fall in aggregate demand across the board,” said Okonjo-Iweala.

The WTO cut its trade growth forecast for 2023 amid a global manufacturing slowdown. In October, the organization scaled back on growth estimates in global merchandize trade for this year due to a continued slump that started in the fourth quarter of 2022.

Global merchandize trade volume is now projected to grow by 0.8% this year, less than half of the 1.7% increase forecasted in April. The 3.3% growth projected for 2024 remains nearly unchanged from the previous estimate.

“The rebound from China has not been as robust after the pandemic as we hoped. We have the real estate crisis in China. European Union growth is slower than we had also hoped,” said the WTO director-general.

“The U.S. seems to be doing okay but still, there’s the issue of aggregate demand falling across the board in most regions and both sectors and persistent inflation with interest rates going up higher for long,” she added.

The Biden administration slapped fresh trade curbs on 11 Chinese and five Russian companies Monday, targeting foreign actors seen as compromising national security and drawing Beijing’s ire.

The U.S. accused Hong Kong-based exporter Asia Pacific Links, three Finnish freight, warehousing, and logistics companies, three Russian entities and a German industrial equipment producer of being embroiled in a scheme to flout U.S. export curbs by supplying drone components to the previously blacklisted Special Technology Center in St. Petersburg, Russia.

These companies were among 28 additions to the U.S. Entity List on Monday. The U.S. Commerce Department’s Bureau of Industry and Security accused eight Chinese additions of procuring or attempting to procure U.S. drone equipment for Iran, while two Omani entities were cited for supporting the Houthi fighters in Yemen.

The list is a tool Washington uses to levy trade restrictions on entities it deems as threatening U.S. national security and has recently been used to curb Chinese technology and penalize involvement in Russia’s war machinery.

“Our actions send a clear message to those trying to evade our export controls that there will be consequences for behavior that seeks to undermine U.S. national security interests,” Under Secretary of Commerce for Industry and Security Alan Estevez in a statement.

“We will not hesitate to take swift and meaningful action against those who continue seeking to supply and support Putin’s illegal and immoral war in Ukraine,” he added.

None of the Chinese entities cited were able to immediately respond to CNBC’s requests for comment. CNBC was unable to reach the spokesperson of one company for comment, while some of the companies did not have public contact details.

“The United States abuses unilateral sanctions and ‘long-arm jurisdiction’ in undermining international trade order and rules, hindering normal international economic and trade exchanges, and harming the legitimate rights and interests of Chinese companies and individuals,” the Chinese Commerce Ministry said in a statement Tuesday.

“The United States should immediately stop its unreasonable suppression of Chinese companies and individuals. China will take necessary measures to resolutely safeguard its legitimate rights and interests,” the Chinese Commerce Ministry added.

— CNBC’s Quek Jie Ann contributed to this story.

China’s dominance in rare earths makes U.S. supply chains vulnerable, U.S. Trade Representative Katherine Tai said in an exclusive interview Saturday with CNBC’s Martin Soong.

Rare earth metals are used in high-tech products such as electric car motors. Over the decades, China has built up its ability to process the metals — giving it enormous pricing power in a critical global market.

“What I want to draw your attention to is not just the vulnerabilities around China’s investments [overseas], but the fact that China’s dominant position in the world market now in [rare earths] means that it is able to turn on the faucet and turn off the faucet,” Tai said.

“And until we are able to access and create additional supply chains we remain entirely vulnerable to that leverage,” the U.S. trade representative said. Tai was speaking in New Delhi, India, on the sidelines of B20, the official business dialogue forum of the G20.

Tai pointed out that about a decade ago, China raised rare earths prices so high that some U.S. mines were able to operate in the industry again, only to have to close once China cut prices.

The U.S. held a majority stake in the rare earths metals market prior to the 1980s. But lower labor costs overseas, as well as less pressure on environmental standards, helped send the rare earths industry out of the U.S.

Meanwhile, Beijing supported the industry.

“The advantage in terms of China’s dominance isn’t necessarily a natural advantage,” Tai said. “It’s not that they have more rare earths but that they were able to pursue coordinated industrial and trade policies that allowed them to corner the market.”

The Chinese government sets economic plans at least every five years, with some goals — such as boosting self-sufficiency in technology and reaching carbon neutrality — set years earlier in advance.

While such top-down planning isn’t guaranteed to achieve results, the electric car industry has become an example of where Chinese industry has been able to capture significant market share across the supply chain, including the end product.

The level of U.S. reliance on China-based manufacturing came to the forefront during the Trump administration, and accelerated when the Covid-19 pandemic in 2020 disrupted global supply chains. The Biden administration has announced multibillion-dollar initiatives to encourage companies to develop and manufacture critical technologies in the U.S.

“Where we are in terms of our supply chains today is not where we want to be,” Tai told CNBC on Saturday. “We know that we’re vulnerable. Where we want to be is in a place where our supply chains are more diversified, where we have more confidence in them, where we just have more options.”

In the case of rare earths, Tai pointed out that China has a monopoly in the global market. She noted that in the case of Australia’s lithium production, China is also the only buyer — giving Beijing another point of market leverage.

While lithium is a key component of electric car batteries, it isn’t one of the 17 metals scientifically categorized as rare earths.

This year, U.S. and European government officials have talked of de-risking, or reducing the level of dependency on China alone. In a speech to global business leaders in June, Chinese Premier Li Qiang said de-risking is a false proposition because global economic interests are so entwined.

Just before the pandemic began, the U.S. and China signed a “phase one” trade agreement which called for China to increase its purchases of U.S. goods as a way to offset the massive U.S. trade deficit with China.

When asked Saturday about where the agreement stands, Tai said the U.S. is still looking at China’s shortfalls in meeting those purchase targets.

She said another aspect to that discussion is the degree to which U.S. trade with China is “imbalanced.”

Official U.S. data said the country’s trade deficit with China rose by 8.3% to $382.9 billion in 2022.

U.S. Secretary of Commerce Gina Raimondo is set to visit China from Sunday to Wednesday, as high-level U.S. official trips to the country have resumed this summer after a lull.

Tensions between the U.S. and China have escalated over the last several years, starting with trade and spilling over into tech and finance.

Many businesses have increasingly started to look for opportunities in India, while the country’s relationship with the U.S. has improved.

On Saturday, Tai also met with India’s Minister of Commerce and Industry Piyush Goyal, and raised concerns about India’s import license requirements for tech equipment, a release said.

“The stars really are aligning between the United States and India and that’s across all of the policy areas,” Tai told CNBC. She described the relationship as “experiencing new heights.”

She said in her area of economics and trade, the potential for working more with India was always there, but previously, “we just couldn’t figure out how to tap it.”

— CNBC’s Samantha Subin contributed to this report.