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U.S.-China Trade Tensions Rise

Mixed WTO ruling opens the way for Chinese sanctions against U.S. tariffs while the U.S. threatens sanctions over China’s continued imports of Iranian Oil.

 

 The World Trade Organization (WTO) issued a mixed ruling last week in a long-running case challenging U.S. countervailing (CV) duty orders on imports from China.  The WTO ruled that the U.S. did not fully comply with a previous WTO ruling and could face Chinese sanctions if it does not remove the certain tariffs that break WTO rules, the WTO’s appeals judges said.

The dispute centered on 17 investigations carried out by the Department of Commerce between 2007 and 2012.  In 2012, China went to the WTO to challenge the U.S. anti-subsidy duties on exports including solar panels, wind towers, high-pressure steel cylinders, lightweight thermal paper, pressure pipe, line pipe, citric acid, tow-behind lawn groomers, kitchen shelving and racks, oil country tubular goods, pre-stressed concrete steel wire strand, magnesia carbon bricks, coated paper, drill pipe, and aluminum extrusions.

While the U.S. revised the duty rates in several of the orders in 2016 in response to the prior ruling, the WTO Appellate Body found that the U.S. improperly used pricing from third countries in determining the rates, when it should have used pricing from China.

But the Appellate Body did agree with the U.S. that China used state-owned enterprises (SOEs) to subsidize production of some of the goods and to distort its economy.

Robert Lighthizer, U.S. Trade Representative, criticized the WTO finding, saying that China’s domestic prices are “distorted” and complained that the decision as a whole “undermines WTO rules, making them less effective to counteract Chinese SOE subsidies that are harming U.S. workers and businesses and distorting markets worldwide.”  The USTR went on to say that the outcome of the appeal illustrates the concerns it has about the Appellate Body, which it accused of breaking procedural rules and overstepping its authority.

If the U.S. does not recalculate the CV duties in compliance with the WTO ruling, China could impose retaliatory sanctions on U.S. goods.  While China has not given any indication as to whether it might retaliate or when, if it does seek to bring sanctions against the U.S., it would need to enter into a new round of legal argument to determine the value of damage to its trade.  Beijing has previously asserted that the CV duties affected about $7.3 billion in annual exports at the time, which could translate into the amount of retaliation that it might seek.

Soon after the ruling was released, Trump questioned China’s failure to make good on its promise to buy more American agricultural goods, and said that if it needed to do so, Washington could impose tariffs on an additional $325 billion worth of Chinese goods.

In the meantime, the State Department has threatened China with sanctions because of its continued imports of Iranian oil.  The potential new tariffs come after China defied U.S. sanctions to cut Iranian oil imports to “zero.”

“We’re going to zero and… we expect all countries to abide by U.S. sanctions,” said Morgan Ortagus, a State Department spokeswoman.  “Countries that don’t abide by U.S. sanctions will face repercussions for not abiding by U.S. sanctions.  That goes for China or any other country in the world.”

China imported more than 1 million barrels of oil from Iran on July 3, despite the expiration of the sanction waivers the U.S. initially granted to Iran’s eight largest oil clients.  China has said from the beginning that it would not comply with the U.S. sanctions on Iran and would continue importing Iranian oil.

Eliana Johnson, a White House correspondent, reported last week that “Senior administration officials are now in agreement that China defied U.S. sanctions when it imported more than a million barrels of crude oil from Iran earlier this month.  They are now grappling with whether – and how – to hit back, according to three U.S. officials.”

 

 

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Sources:

 

  • South China Morning Post, WTO opens way for Chinese sanctions against US tariffs in Obama-era dispute
  • STR Trade Report, Mixed Ruling in WTO Case Could Yield Further U.S.-China Trade Tensions
  • com, U.S. Threatens China With Sanctions On Iranian Oil Imports
  • Daily Caller, US Considers More Tariffs On China For Importing Iranian Oil Amid Trade Tensions

 

 

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