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China has accused the US of making “unfounded and false allegations” regarding its role in the fentanyl trade as a justification for imposing tariffs on Chinese goods.
The complaint, filed with the World Trade Organization (WTO) one day after US President Donald Trump raised border taxes on Chinese products by 10%, claims the measures are “discriminatory and protectionist” and violate trade regulations.
WTO Challenges and Trade Implications
Experts suggest that China is unlikely to secure a favorable ruling, as the WTO’s appellate panel remains non-functional due to the US blocking the appointment of new judges. A former WTO official told the BBC that China’s complaint has “no possibility of succeeding.”
Trump’s tariff strategy, aimed at reducing America’s trade deficit, is creating uncertainty across the global economy. While he argues that tariffs encourage domestic production, businesses and analysts worry about their economic impact. Some firms have responded by delaying investments, while others, like Canadian tights-maker Sheertex, have resorted to layoffs due to tariff uncertainties.
US imports surged to a record high in December, reaching $293.1 billion, the highest level since 1992, according to the Commerce Department. This contributed to the widest trade deficit in nearly two years, further intensifying economic concerns.
China’s Retaliation and Industry Impact
China swiftly retaliated by imposing tariffs on US goods and launching an anti-monopoly investigation into Google. Reports also suggest that Chinese regulators may target Apple over its App Store policies, further escalating tensions.
Trump’s new measures, including ending duty-free treatment for parcels under $800, will significantly impact retailers such as Shein and Temu, potentially eroding their ability to offer ultra-low prices. However, Mark Williams, Chief China Economist at Capital Economics, believes the overall impact on China’s economy will be manageable.
WTO Dispute Process and Uncertain Outcome
Under WTO procedures, the US and China have 60 days to resolve their dispute through consultations before China can request a ruling from a WTO panel. However, with the WTO’s appellate body unable to function, any final resolution is unlikely.
Jeff Moon, a former Assistant US Trade Representative for China Affairs, expects the WTO to initially rule in China’s favor. However, given the stalled appeals process, a final decision may never be issued. He suggests that China’s complaint serves more as a symbolic move to highlight US non-compliance with global trade rules.
Trade Deficit Trends
China ranked as the country with the largest trade surplus with the US in December, exporting $25.3 billion more than it imported. The European Union followed, while the US maintained a small $2.3 billion surplus in goods trade with the UK.
Overall, the US trade deficit, including services, grew 17% last year to $918.4 billion, reflecting a sharp increase in imports over exports. The December trade deficit alone reached $98.4 billion, the highest level since March 2022, according to the Commerce Department.
As US-China trade tensions escalate, the long-term implications for global commerce remain uncertain.