WTO Grants China a $645 Million Tariff Weapon Against U.S.

(Bloomberg) -- The World Trade Organization granted Beijing a new tariff weapon against the U.S. during a politically sensitive moment for the Biden administration -- almost a year into a tenuous truce in the trade war between the two largest economies.

On Wednesday, a WTO arbitrator in Geneva said China can retaliate against $645 million worth of annual American exports as part of a decade-old trade dispute over U.S. anti-subsidy duties on Chinese goods. The amount was much less than the $2.4 billion that China had initially requested legal authority to target.

While $645 million pales in comparison to the tariffs China imposed on $110 billion worth of U.S. goods during the Trump administration, it still provides Beijing with a new irritant with which to pressure President Joe Biden as he seeks to tamp down inflationary headwinds ahead of midterm elections.

The Biden administration could attempt to head off China's WTO-authorized tariffs, but to do so it must revise U.S. countervailing duties, which would increase competition for key U.S. manufacturing sectors like steel and aluminum.

Beijing may now request formal WTO authorization to retaliate against U.S. goods and services, which could be granted as soon as next month.

China “will keep a close watch on the next moves of the U.S. and reserves the right to take further action,” Ministry of Commerce Spokesman Gao Feng said at a press briefing Thursday. China hopes the U.S. will stop finding excuses and take immediate actions to correct its wrongdoings in its trade remedies investigation against China, Gao said.

U.S. Disappointment

Adam Hodge, a spokesman for the U.S. Trade Representative, said the decision was “deeply disappointing” and “reflects erroneous Appellate Body interpretations that damage the ability of WTO members to defend our workers and businesses from China's trade-distorting subsidies.”

“Today's decision reinforces the need to reform WTO rules and dispute settlement, which have been used to shield China's non-market economic practices and undermine fair, market-oriented competition,” Hodge said in an emailed statement.

The dispute dates back to 2012, when China complained that the U.S. imposed illegal countervailing duties on about a dozen Chinese imports including thermal paper, pipes, citric acid, lawnmowers, kitchen shelving, magnesia bricks, print graphics, solar panels, wind towers, and steel sinks.

The WTO repeatedly ruled against the U.S. in the dispute and subsequently found that the Washington failed to withdraw its illegal countervailing duties in a timely manner.