China calls Trump tariffs 'discriminatory' in WTO complaint

China has accused the United States of making "baseless false accusations" regarding its role in the fentanyl trade, using this as justification for imposing tariffs on Chinese goods. Beijing has filed a complaint with the World Trade Organization (WTO) expressing strong dissatisfaction with these accusations. China hopes the WTO will investigate these claims and find them to be without merit.

The complaint was filed a day after U.S. President Trump raised border taxes on Chinese goods by 10%, claiming the move was aimed at addressing the influx of illegal drugs. In its filing, China stated that these measures are "discriminatory and protectionist" in nature, violating trade rules. China believes the U.S. tariff actions lack a reasonable basis and undermine fair trade principles, potentially setting a dangerous precedent for future trade relations.

However, experts warn that China is unlikely to obtain a favorable ruling because the panel for resolving trade disputes remains inoperable. A former WTO official told the BBC that China "has no chance of success." The appellate body is effectively paralyzed due to the U.S.'s refusal to approve the appointment of new judges, making any ruling difficult to enforce, and further complicating the resolution process.

This dispute comes as Trump plans to impose tariffs on all foreign goods entering the U.S., creating uncertainty in the global trade landscape. Trump has stated that tariffs will encourage companies to manufacture products in the U.S. and has repeatedly expressed concerns about the size of the U.S. trade deficit. However, his actions against China have raised concerns about their impact on the global economy, including in the U.S., as businesses respond to trade uncertainty by delaying investments or passing new costs onto customers.

Canadian tights manufacturer Sheertex announced on Wednesday that it had temporarily laid off 40% of its nearly 350 employees due to tariff issues. U.S. imports hit a record high in December as businesses reacted to tariff threats, racing to secure supplies of foreign-made toys, cellphones, and computers. The Commerce Department said on Wednesday that the value of goods entering the U.S. jumped 4% from November to December to $293.1 billion (£234.4 billion), the highest since records began in 1992. This increase also contributed to the largest trade deficit, the gap between exports and imports, in nearly two years.

Tariffs have also triggered political tensions, including retaliation from China. China has responded to Trump's moves by imposing tariffs on U.S. goods and launching antitrust investigations into companies like Google. The speed with which China filed its complaint with the WTO indicates Beijing's preparedness for a trade war. Bloomberg also reported on Wednesday that Chinese antitrust regulators are preparing a possible investigation into Apple's policies and App Store fees, hitting the company's stock price, demonstrating the breadth of potential retaliatory measures.

Mark Williams, chief China economist at Capital Economics, said Trump's moves—including ordering an end to the tax-free treatment of packages worth less than $800—will be a significant "shock" to some companies, such as Shein and Temu, as they undermine their ability to offer ultra-low prices. However, he stated that he does not believe the impact of Trump's tariffs will be too significant for China as a whole. "For the broader Chinese economy, this is absolutely manageable," he said, suggesting the Chinese economy is resilient enough to absorb the impact.

WTO procedures give the U.S. and China 60 days to resolve the dispute through consultations, at which point China has the right to request a panel of judges to make a ruling. But the final WTO panel for resolving trade disputes—the appellate body—remains inoperable because the U.S. has refused to approve the appointment of new judges to the body. The U.S. has also ignored a previous WTO ruling that earlier tariffs imposed on steel and aluminum during Trump's first term violated the rules, further undermining the WTO's authority.

Tom Graham, who served as chairman of the WTO's appellate body in 2016 and 2019, told the BBC that the first stage of Beijing's complaint could take "a year" to reach a decision, with little chance of further progress. He said: "The way the WTO dispute settlement system used to work, this might be a strong case, but it ultimately has no chance of success," highlighting the limitations of the current system.

Jeff Moon, who oversaw China trade policy during President Obama's administration, told the BBC that he expects any initial WTO ruling to support China's position. However, these cases typically take years to resolve, and because the appeals process is paralyzed, "a final decision will never be issued." The former assistant U.S. trade representative for China affairs added that Beijing needs to bring the suit to support its often-stated position that the U.S. is undermining the rules-based trading system and the relationship between the two countries.

In December, China had the largest goods deficit, exporting $25.3 billion more in goods to the U.S. than it purchased. The European Union, another target of Trump's tariff threats, had the second-largest deficit. In contrast, the U.S. had a $2.3 billion goods trade surplus with the United Kingdom. Overall, the U.S. trade deficit, including services, grew by 17% last year to $918.4 billion, as imports grew faster than exports. The Commerce Department said the trade deficit in goods and services was $98.4 billion in December, the highest level since March 2022, indicating a continued imbalance in trade flows.