It’s the latest step in a downward spiral in relations between the dueling economic powers which have sunk to the lowest level in decades.
The BBC’s Barbara Plett Usher takes a look at the motivations – and potential consequences – of this US-China face-off.
How significant is this escalation?
It is not unprecedented for the US to close a foreign mission but it is a rare and dramatic step, one that is difficult to unwind. This is a consulate not an embassy, so it’s not responsible for policy. But it plays an important role in facilitating trade and outreach.
And the move triggered retaliation from Beijing: it ordered the US to close its consulate in the western Chinese city of Chengdu, dealing a further blow to the diplomatic infrastructure that channels communication between the two countries.
It’s probably the most significant development yet in the deterioration of relations over the past months, which have included visa restrictions, new rules on diplomatic travel, and the expulsion of foreign correspondents. Both sides have imposed tit-for-tat measures, but it is the United States that has largely been driving this latest cycle of confrontation.
How did we get here?
Senior administration officials have described the Houston consulate as “one of the worst offenders” in economic espionage and influence operations that they say are occurring at all the Chinese diplomatic facilities.
A certain amount of spy-craft by foreign missions is expected but the officials said activity in Texas went well over acceptable lines and they wanted to send a strong message that it would not be tolerated.
The decision to take more “decisive action” to counter China and “disrupt” its operations coincides with a speech earlier this month by the FBI Director Christopher Wray. He said the Chinese threat to US interests had massively accelerated in the past decade, noting that he opened a new China-related counterintelligence investigation every 10 hours.
Beijing has routinely denied these charges and in the case of Houston, called them “malicious slander”.
Critics of the Trump administration’s approach are sceptical about the value of closing the Houston consulate and the timing of the move. “It has a wag the dog feel to it,” says Danny Russel, who served as the State Department’s top Asia official under President Barak Obama, suggesting it’s at least partly an attempt to create a diversion from President Donald Trump’s political troubles ahead of a November election.
So is this move to confrontation about the election?
Yes and no.
“Yes” because Mr Trump has only recently fully adopted the anti-China campaign-speak that his strategists feel will resonate with voters. It builds on his 2016 nationalist talking points about getting tough with a China that had “ripped off the United States”.
But it adds a heavy dose of blame over the way Beijing handled the coronavirus outbreak as the president’s ratings on his own response tumble. The message is that China is responsible for the Covid mess in the country, not him.
“No” because hardliners in his administration, like Mr Pompeo, have for some time been pressing for tougher action against Beijing and laying the groundwork for such an approach. The president had been vacillating between that advice and his own desire to pursue a trade deal and develop his “friendship” with the Chinese Leader Xi Jinping.
The consulate closure indicates that the China hawks have gained the upper hand for now, aided by genuine anger in Washington at the Chinese government’s lack of transparency about a virus that has brought global disaster.
What does this say about the state of US-China relations?
They’re pretty bad – at their lowest point since President Richard Nixon moved to normalise relations with the communist country in 1972. And both are to blame.
This has been building since President Xi Jinping came to power in 2013 with a much more assertive and authoritarian playbook than his predecessors. China has added to the recent run-up in tensions with its harsh national security law in Hong Kong and its repression of Muslim minority Uighurs, which triggered several rounds of US sanctions.
But its clash with the Trump administration’s America First nationalism is increasingly shaped by an ideological worldview that infused a speech about China delivered by Mr Pompeo this week. In rhetoric reminiscent of the Cold War, he accused Chinese leaders of being tyrants on a quest for global domination, and framed America’s competition with Beijing as an existential struggle between freedom and oppression.
Many in Chinese government circles believe that the administration’s goal is to stop the country from catching up to America’s economic might, and are particularly angry at its moves to cut off access to Chinese telecommunications technology. But there is concern and confusion about the dizzying ramp-up of punitive measures. The foreign minister Wang Yi recently pleaded with the US to step back and seek areas where the two nations could work together.
Where is this heading?
In the short term expect a precarious state of tension up to the election. The Chinese do not appear to be looking for escalation, and analysts agree that President Trump does not want a serious confrontation, certainly not a military one.
But Mr Russel, who’s currently a vice president at the Asia Society Policy Institute, warns about unintended conflict. “The buffer that has historically insulated the US-China relationship, the presumption that the goal is to de-escalate and solve problems… has been stripped away,” he says.
The long term depends on who wins in November. But even though the Democratic candidate Joe Biden would be more inclined to revive avenues of cooperation, he’s also campaigning on a get-tough-with-China message. It’s a popular theme reflecting an extremely rare bipartisan consensus that goes beyond the occupant of the White House.
Jim Carafano, a national security expert at the conservative think tank, The Heritage Foundation, argues that challenging China’s “destabilising” behaviour is a path to stability, not escalation. “In the past we haven’t made clear where the Chinese were violating our interests and they’ve marched on,” he told the BBC.
But William Cohen, a Republican politician who served as defence secretary under the Democratic President Bill Clinton, thinks it’s dangerous that China is being seen as an adversary across the political spectrum.
Its military, economic and technological expansions have caused the US to say “we can’t do business the way we’ve been doing business,” he says.
“But we still have to do business.”