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On Tuesday, the World Trade Organization ruled that tariffs the Trump Administration imposed on Chinese imports in 2018 are a violation of international trade rules—handing China a symbolic victory in the prolonged trade war.
But the ruling is unlikely to have any practical effect. The Trump White House, long scornful of the WTO, has neutered the body’s key arbitration court—the Appellate Body—creating a loophole that could leave the dispute unresolved.
For the Tuesday ruling, a three-person panel considered a complaint filed by China in 2018, which argued that tariffs Washington imposed on $200 billion worth of Chinese imports violated international trade rules. Under WTO regulations, members must treat each other as equal. Levying sanctions against only one member state contravenes that credo.
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In its ruling, the panel found that the “United States has not met its burden of demonstrating that the measures are provisionally justified” and so “recommends” the U.S. “bring its measures into conformity” with WTO rules.
“This panel report confirms what the Trump Administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices,” U.S. Trade Representative Robert Lighthizer said in response to the WTO ruling.
China’s Ministry of Commerce, of course, welcomed the “objective, impartial” ruling and urged the U.S. to fall in line.
To satisfy the WTO ruling, the U.S. would have to remove the tariffs it initially imposed on China way back in 2018. If it doesn’t, then the WTO could authorize China to impose counter-tariffs on the U.S. Such approval would be moot, however, as China has already met U.S. tariffs in kind.
China has imposed tariffs on $110 billion worth of U.S. imports but, because the U.S. has not filed a WTO complaint against China’s tax action, the WTO panel hasn’t moved to review China’s actions.
If the U.S. now does nothing, the current tariffs on each side stay in place—but China can at least claim the moral high ground.
Alternatively, the U.S. could appeal the WTO ruling, sending the decision to the WTO’s Appellate Body—an appeals court presided over by seven judges appointed by the WTO’s Dispute Settlement Body (DSB). Doing so would kick proceedings into judicial purgatory as the WTO’s rulings can’t be implemented until the appeals process is complete.
And, thanks to the U.S., the Appellate Body is currently in disfunction—meaning an appeal won’t be reviewed anytime soon.
The U.S. has railed against the WTO’s dispute settlement system for years, with complaints pre-dating the Trump Administration. Washington has accused the dispute body of overreach and unfairly limiting the U.S.’s ability to protect itself against dumping and subsidies.