The World Trade Organization (WTO) Tuesday struck at the core of President Trump’s trade war on China, ruling that the tariffs he imposed in 2018 on $234 billion worth of Chinese goods ran afoul of U.S. commitments under global trading rules.
The U.S. tariffs against China were authorized under Section 301 of the Trade Act of 1974, which empowers the president to levy tariffs and other import restrictions whenever a foreign country imposes unfair trade practices that affect U.S. commerce. The Trump administration has claimed the tariffs were necessary to confront China’s widespread violations of intellectual property rights and forced technology transfer policies.
Though the use of Section 301 isn’t unprecedented, the provision largely fell out of favor in the 1990s after the U.S. agreed to first follow the WTO’s dispute-settlement process before it triggered any retaliatory trade actions.
The ruling will have no immediate impact on U.S. customs officials’ ability to collect the import taxes from American importers. The administration said its tariffs were needed to curb years of trade cheating by China. But in a 66-page report, the panel rejected that claim.
“The United States has not met its burden of demonstrating that the measures are justified,” the panel concluded.
The U.S. can stall any further action by appealing Tuesday’s ruling. The administration has blocked for months the appointment of new members to the WTO’s appellate body, leaving the organization unable to fulfill its assigned role of adjudicating trade spats.
What can importers do?
The situation remains very fluid. We are advising clients to do the following:
- Know whether your imports are affected and decide what you’re going to do about it.
- If you have a question about whether your products are affected by these or other tariffs, we may be able to help. We can tell you what impact the tariffs will have on your shipments, and help you file a claim for an exemption.
- Consider sourcing options in other countries besides China.