China has strongly denied U.S. claims that it plays a role in the fentanyl trade. It accused Washington of making “unfounded and false allegations” to justify new tariffs on Chinese goods.
The dispute escalated after President Donald Trump raised tariffs on Chinese imports by 10%. He argued that these tariffs would help stop the flow of illegal drugs into the U.S.
China Files Complaint with WTO
China took swift action by filing a complaint with the World Trade Organization (WTO). It called the tariffs “discriminatory and protectionist,” claiming they violate global trade rules.
However, experts believe China is unlikely to win. The WTO’s dispute resolution panel, which settles trade conflicts, is not functioning. A former WTO official told the BBC, “It has no possibility of succeeding.”
Trump’s Tariffs Disrupt Global Trade
Trump’s aggressive tariff policies have shaken global markets. He insists that higher tariffs will push companies to manufacture in the U.S. and reduce the country’s trade deficit.
But his strategy has raised concerns. He has threatened to expand tariffs to Canada, Mexico, and Europe, causing businesses to delay investments or pass extra costs to consumers.
Businesses Struggle as Imports Hit Record High
Companies are already feeling the impact. Canadian tights-maker Sheertex recently laid off 40% of its workforce, blaming tariff uncertainties.
Meanwhile, U.S. imports surged to a record high in December. Fearing higher tariffs, businesses rushed to buy foreign-made goods, including toys, mobile phones, and computers.
The Commerce Department reported a 4% increase in imported goods, reaching $293.1 billion—the highest level since 1992. This also widened the trade deficit, making the gap between imports and exports the largest in nearly two years.
China Retaliates with Countermeasures
China wasted no time in responding. It imposed tariffs on U.S. goods and launched an anti-monopoly investigation into Google.
Reports suggest that Beijing is also preparing to investigate Apple’s App Store fees. This news has already affected Apple’s stock prices.
E-Commerce Giants Face Major Challenges
Trump’s decision to end duty-free treatment for parcels under $800 could hit online retailers hard. Companies like Shein and Temu, which depend on low-cost international shipping, will struggle to maintain their low prices.
Mark Williams, chief China economist at Capital Economics, said, “For the wider Chinese economy, this is definitely manageable.” However, smaller firms may find it difficult to cope.
WTO Dispute Likely to Stall
Under WTO rules, the U.S. and China have 60 days to negotiate a resolution. If talks fail, China can request a panel of judges to review the case.
However, the WTO’s appellate body, which makes final rulings, remains blocked. The U.S. has refused to approve new judge appointments, making it impossible to resolve past trade disputes.
Experts Say China’s Case Will Not Succeed
Trump ignored a previous WTO ruling that his steel and aluminum tariffs violated trade rules. Experts believe the same will happen with China’s complaint.
Tom Graham, a former WTO appellate body chair, predicted that Beijing’s case could take a year to move forward. But he added, “It has no possibility of succeeding here.”
Jeff Moon, a former U.S. trade official under President Obama, agreed. He said the WTO might initially rule in China’s favor, but because the appeals process is blocked, “A final decision will never be issued.”
China’s Trade Surplus with U.S. Widens
Despite tensions, China continues to send more goods to the U.S. than it buys. In December, its trade surplus with the U.S. reached $25.3 billion.
The European Union had the second-largest trade gap with the U.S., while the U.K. was one of the few countries where the U.S. had a small trade surplus of $2.3 billion.
Overall, the U.S. trade deficit—including goods and services—rose 17% last year, hitting $918.4 billion. In December alone, it reached $98.4 billion, the highest level since March 2022.
