China has accused the US of making baseless and misleading claims about its role in the fentanyl trade to justify tariffs on Chinese merchandise.
The complaint was lodged with the World Trade Organization (WTO) one day after US President Donald Trump increased border taxes on Chinese goods by 10%, a measure he said was intended to address an inflow of illegal drugs.
In the filing, China said the measures were biased and protectionist and violated trade regulations.
But experts have warned that China is unlikely to obtain a ruling in its favor as the panel that resolves trade disputes remains unable to function. One former WTO official told the BBC it has “no possibility of succeeding.”
The dispute comes as Trump’s intentions for tariffs – a tax he has said he wants to see levied on all foreign shipments into the nation – are causing uncertainty across the global trade arena.
Trump has said tariffs will encourage firms to manufacture their products in the US, repeatedly expressing concern about the size of America’s trade imbalance.
But his actions against China – which he has threatened to extend to include Canada, Mexico, and Europe – have sparked concerns about their effect on the global economy, including in the US, as businesses respond to trade uncertainty by delaying investments or transferring new costs to customers.
Sheertex, a Canadian tights-maker, on Wednesday announced that it was temporarily laying off 40% of its nearly 350 workers, citing the tariff issues.
US imports hit their highest on record in December as businesses responded to the threats of tariffs, hurrying to secure foreign-made toys, mobile phones, and computers.
The value of goods brought into the US surged 4% from November to $293.1bn (£234.4bn), the highest since records began in 1992, the Commerce Department said on Wednesday.
The rise also contributed to the largest trade deficit, or gap, between exports and imports in nearly two years.
The tariffs have also provoked political friction, including retaliation from China, which responded to Trump’s move with tariffs on US goods and an anti-trust probe of Google, among other measures.
The pace with which China filed its complaint with the WTO is an indication of Beijing’s preparedness for the trade fight.
On Wednesday, Bloomberg also reported that the country’s competition regulator was preparing for a possible investigation into Apple’s policies and App Store fees, impacting the company’s shares.
Trump’s moves – which included ordering an end of duty-free treatment for parcels worth less than $800 – will be a major “shock” to some firms, such as Shein and Temu, as they reduce the ability to offer ultra-low prices, said Mark Williams, chief China economist at Capital Economics.
But he said he thought for China overall that the consequences of Trump’s tariffs would not be too severe.
“For the broader Chinese economy, this is definitely manageable,” he said.
WTO procedures give the US and China 60 days to settle their dispute through consultations, at which point China has the right to request judgment by a panel of judges.
But the final WTO panel that rules on trade disputes – known as the appellate body – remains unable to function, as the US refuses to endorse the appointment of new judges to the body.
The US also disregarded a previous finding by the WTO that earlier tariffs on steel and aluminum that were imposed during Trump’s first term were against the rules.
But Tom Graham, who chaired the WTO’s appellate body in 2016 and 2019, told the BBC it would “probably be a year” before there is a ruling from the first stage of Beijing’s complaint and it has little chance of progressing further.
“It may be a strong case, the way the WTO dispute settlement system used to work, but it has no possibility of succeeding here ultimately,” he said.
Jeff Moon, who worked on China trade policy for President Barack Obama, told the BBC that he expected any initial WTO verdict to support China’s position.
These cases typically take years to be settled, however, and because the appeals process has been halted, “a final decision will never be issued.”
The former Assistant US Trade Representative for China Affairs added that Beijing needed to file the case to support its frequently asserted position that it is the US that weakens the rules-based trading system and the relationship between the two countries.
China ranked as the country with the biggest deficit in goods in December, sending $25.3bn more into the US than it acquired.
The European Union, a target of Trump’s tariff threats, had the second largest gap.
By contrast, the US enjoyed a small excess of $2.3bn in goods trade with the UK.
Overall, the trade deficit in the US, including services, rose 17% last year to a total of $918.4bn, as imports grew faster than exports.
In December, the trade deficit in goods and services was $98.4bn, the highest since March 2022, the Commerce Department said.
