China challenges Trump tariffs as 'discriminatory'

China has taken a strong stance against the United States, claiming that the US is making 'unfounded and false allegations' regarding its involvement in the fentanyl trade. This accusation comes in response to the recent decision by US President Donald Trump to raise tariffs on Chinese goods by 10%. Trump has stated that these tariffs are necessary to combat the influx of illegal drugs into the country. In a formal complaint filed with the World Trade Organization (WTO), China described the US measures as 'discriminatory and protectionist,' arguing that they violate established trade rules. However, experts caution that China may struggle to achieve a favorable ruling, as the WTO's dispute resolution panel is currently unable to function effectively. A former WTO official expressed skepticism, stating that there is 'no possibility of succeeding' in this case. This trade dispute arises amid Trump's broader plans for tariffs, which he believes will encourage American companies to produce goods domestically rather than relying on imports. He has repeatedly voiced concerns about the size of the US trade deficit, which occurs when the country imports more than it exports. However, Trump's aggressive stance towards China, which he has threatened to extend to Canada, Mexico, and Europe, has raised alarms about potential repercussions for the global economy. Businesses are responding to this uncertainty by delaying investments or passing increased costs onto consumers. For instance, a Canadian company that produces tights recently announced it would temporarily lay off 40% of its workforce due to concerns over tariffs. In December, US imports reached an all-time high as businesses rushed to secure foreign-made products before the tariffs took effect. The value of goods imported into the US surged by 4% from November, totaling $293. 1 billion, marking the highest level since records began in 1992. This surge in imports also contributed to the widest trade deficit in nearly two years, highlighting the growing gap between exports and imports. The imposition of tariffs has also led to heightened political tensions, with China retaliating by imposing its own tariffs on US goods and launching an anti-monopoly investigation into Google, among other actions. The speed at which China filed its complaint with the WTO indicates its readiness to engage in this trade conflict. Reports have also surfaced that China's anti-monopoly regulator is preparing to investigate Apple's business practices, which has negatively impacted the company's stock prices. Trump's recent actions, including the termination of duty-free treatment for packages valued under $800, are expected to create significant challenges for certain companies, such as Shein and Temu, as these changes will hinder their ability to offer low prices. Nevertheless, some experts believe that the overall impact of Trump's tariffs on China's economy will be manageable. According to Mark Williams, chief China economist at Capital Economics, 'For the wider Chinese economy, this is definitely manageable. ' The WTO procedures allow for a 60-day consultation period for the US and China to resolve their dispute. If they cannot reach an agreement, China has the right to request adjudication by a panel of judges. However, the WTO's appellate body, which typically handles trade disputes, is currently unable to function due to the US's refusal to approve the appointment of new judges. The US has also disregarded a previous WTO ruling that stated earlier tariffs on steel and aluminum imposed during Trump's first term were against the rules. Tom Graham, who chaired the WTO's appellate body in 2016 and 2019, indicated that it could take 'probably a year' before a decision is reached regarding China's complaint, and he believes it has little chance of progressing further. Jeff Moon, a former trade policy advisor for President Obama, expressed his expectation that any initial WTO decision would support China's position. However, he noted that these cases typically take years to resolve, and due to the current paralysis of the appeals process, 'a final decision will never be issued. ' Moon emphasized that Beijing needed to file this case to reinforce its long-standing assertion that the US undermines the rules-based trading system and the bilateral relationship between the two nations. In December, China recorded the largest trade deficit with the US, sending $25. 3 billion more in goods than it purchased. The European Union, which has also been targeted by Trump's tariff threats, experienced the second-largest trade gap. In contrast, the US enjoyed a small surplus of $2. 3 billion in goods trade with the UK. Overall, the US trade deficit, which includes services, rose by 17% last year, reaching a total of $918. 4 billion, as imports outpaced exports. In December, the trade deficit in goods and services reached $98. 4 billion, the highest level since March 2022, according to the Commerce Department.