China has accused the US of making “unfounded and false allegations” about its role in the fentanyl trade to justify tariffs on Chinese products.
The complaint was lodged with the World Trade Organisation (WTO) one day after US President Donald Trump raised border taxes on Chinese goods by 10%, a measure he said was intended to address an influx of illegal drugs.
In the filing, China said the measures were “discriminatory and protectionist” and violated world trade rules.
The dispute comes as Trump’s plans for tariffs – a tax he has said he wants to see imposed on all foreign shipments into the country – are causing uncertainty across the global trade landscape.
Trump has said tariffs will encourage firms to make their products in the US, expressing repeated concern about the size of the trade deficit.
But his actions against China – which he has threatened to widen to other countries including Canada, Mexico and Europe – have sparked concerns about their impact on the economy, including in the US, as businesses respond to trade uncertainty by holding off on investments or pass on new costs to customers.
Sheertex, a Canadian tights-maker, on Wednesday announced that it was putting 40% of its nearly 350 workers on temporary layoff, citing the tariff questions.
US imports hit their highest on record in December as businesses responded to the threats of tariffs, racing to secure foreign-made toys, mobile phones and computers.
The value of goods brought into the US jumped 4% from November to $293.1bn, the highest since records began in 1992, the Commerce Department said on Wednesday.
The rise also contributed to the widest trade deficit, or gap, between exports and imports in nearly two years.
The tariffs have also provoked political tension, including retaliation from China, which responded to Trump’s move with tariffs on US goods and an anti-monopoly probe of Google, among other measures.
The speed with which China filed its complaint with the WTO is an indication of Beijing’s readiness for the trade fight.
On Wednesday, Bloomberg also reported that the country’s anti-monopoly regulator was preparing for a possible investigation into Apple’s policies and App Store fees, hitting 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 erode 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 effects of Trump’s tariffs would not be too damaging.
“For the wider Chinese economy, this is definitely manageable,” he said.
WTO procedures give the US and China 60 days to resolve their dispute through consultations, at which point China has the right to request adjudication by a panel of judges.
But it is unclear how effective a remedy it will be.
The final WTO panel that settles trade disputes remains unable to function, as the US refuses to approve the appointment of new judges to the body.
The US also ignored a previous finding by the WTO that earlier tariffs on steel and aluminium that were imposed during Trump’s first term were against the rules.
Jeff Moon, who worked on China trade policy for President Barack Obama, told the BBC that he expected any initial WTO decision to support China’s position.
These cases typically take years to be resolved, however, and because the appeals process has been paralysed, “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 stated position that it is the US that undermines 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 purchased.
The European Union, a target of Trump’s tariff threats, had the second largest gap.
By contrast, the US enjoyed a small surplus 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 increased faster than exports.
In December, the trade deficit in goods and services was $98.4bn, the highest since March 2022, the Commerce Department said.
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