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TWN
Info Service on WTO and Trade Issues (Apr25/05) Geneva, 7 Apr (D. Ravi Kanth) — Calling the “reciprocal tariffs” announced by United States President Donald Trump on Chinese goods a grave violation of international trade rules, seriously undermining “China’s legitimate and lawful rights and interests”, and “is a typical unilateral bullying practice,” China has retaliated with a 34% tariff on all American goods, which will come into effect on 10 April. President Trump had on 2 April announced a regime of “reciprocal tariffs” against many countries, including a 34% tariff on all Chinese goods entering the US that will come into effect on 9 April. In addition, the US had also imposed a 20% tariff on Chinese goods over the alleged illegal supplies of the drug fentanyl entering the US market that had already come into effect last month. The US also imposed a baseline tariff of 10% on all countries that came into effect on 5 April. Meanwhile, the varying levels of reciprocal tariffs imposed on more than 60 countries, which are estimated to average 23%, will come into effect on 9 April. The latest reciprocal tariffs imposed by President Trump have apparently surpassed the tariffs imposed under the Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act, which led to the Great Depression. Responding to the allegedly unilateral reciprocal tariffs imposed by the US on Chinese goods, Beijing has decided to impose a 34% tariff on all American goods as well as a regime of export sanctions on the supply of critical rare earth minerals and their processed products. Prior to its latest announcement, China last month imposed tariffs of 15% on imports of coal and liquefied natural gas (LNG) from the US in retaliation for Washington’s 10% duties on Chinese goods. It also announced stiff export controls on key minerals and businesses, limiting what could be exchanged with the US. “The purpose of the Chinese government’s implementation of export controls on relevant items in accordance with the law is to better safeguard national security and interests, and to fulfil international obligations such as non-proliferation,” the Ministry of Commerce said in a statement. CHINA’S TARIFF ANNOUNCEMENT China’s Customs Tariff Commission of the State Council on 4 April issued the strongest statement yet on the US reciprocal tariffs imposed on Chinese goods entering the US market. The US move “is not in line with international trade rules, seriously undermines China’s legitimate and lawful rights and interests, and is a typical unilateral bullying practice,” the Commission said in a brief statement. According to the statement, the Commission said “in accordance with the Customs Law of the People’s Republic of China, the Foreign Trade Law of the People’s Republic of China and other laws and regulations and the basic principles of international law, with the approval of the State Council, from 12.01 on April 10, 2025, additional tariffs will be imposed on imported goods originating in the United States. The relevant matters are as follows: 1. A 34% tariff will be imposed on all imported goods originating in the United States on top of the current applicable tariff rate. 2. The current bonded and tax reduction and exemption policies remain unchanged, and the additional tariffs imposed this time will not be reduced. 3. Before 12:01 on April 10, 2025, if the goods have been shipped from the place of departure and imported from 12:01 on April 10, 2025 to 24:00 on May 13, 2025, the additional tariff stipulated in this announcement will not be levied.” China also imposed sweeping export controls to limit the exchange of goods and services with the US, according to news reports. Some pertained to the export of medium and heavy rare earths to the US, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium, effective from 4 April. Others took aim at US businesses, with China adding 16 US entities to its export control list, which bans the export of dual-use items to affected firms in the US. Another 11 US firms were included in the “unreliable entities” list, which allows Beijing to take punitive action against foreign entities. The targeted firms include Skydio Inc and BRINC Drones, Inc over arms sales to Taiwan, which China claims as part of its territory. The Chinese Commerce Ministry said that the targeted companies seriously “undermined” China’s national sovereignty, security and development interests and would be banned from new investments, import and export activities in China. CHINA INITIATES WTO DISPUTE In addition to the proposed 34% tariff on American goods, China on 4 April also initiated a trade dispute against the US at the World Trade Organization over the US retaliatory tariffs. A spokesperson of the Chinese commerce ministry told reporters on 4 April that Beijing has filed a complaint with the WTO invoking dispute settlement proceedings against the reciprocal tariffs announced by Washington on 2 April. “The so-called “reciprocal tariff” imposed by the United States is a blatant violation of WTO rules,” the spokesperson said, adding that “it undermines the legitimate interests of other WTO members as well as the rules-based multilateral trading system.” “The unilateral and coercive tariff measures adopted by the United States seriously disrupt the stability of [the] global economy,” the spokesperson said, insisting that “China is strongly opposed to such measures.” China asserted that it “always stands firmly in support of the multilateral trading system.” Beijing urged “the United States to immediately correct its wrongful practices and eliminate the tariff measures accordingly.” As a first step, China has requested that the US enter into consultations with China under Article 4 of the WTO’s Dispute Settlement Understanding (DSU) within the stipulated period of 30 days. Under the DSU, if the two sides fail to reach an amicable agreement within 60 days, then China can request the establishment of a panel against the US. However, the WTO’s enforcement function remains paralyzed and it is almost impossible for Beijing to secure any relief, which China is well aware of, said people familiar with the current development. WHO IS GOING TO BLINK? While President Trump said that China has “panicked” after Beijing announced retaliatory tariffs on 4 April, it appears from his posts that Washington is looking forward to a dialogue. In his first post on his Truth Social website on 3 April, President Trump wrote, “We hope to continue working in Good Faith with China, who I understand are not very happy about our Reciprocal Tariffs (Necessary for Fair and Balanced Trade between China and the U.S.A.!).” Immediately after announcing a second 75-day extension to TikTok to continue operating in the US, President Trump lauded his reciprocal tariffs, saying that “this proves that Tariffs are the most powerful Economic tool, and very important to our National Security! We do not want TikTok to “go dark.” We look forward to working with TikTok and China to close the Deal.” In another post on 4 April in response to the retaliatory duties of 34% imposed by China on American goods, President Trump claimed that “China has been hit much harder than the USA, not even close.” “They [China], and many other nations, have treated us unsustainably badly,” President Trump said, adding that “we have been the dumb and helpless “whipping post,” but not any longer.” “We are bringing back jobs and businesses like never before. Already, more than FIVE TRILLION DOLLARS OF INVESTMENT, and rising fast! THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN. HANG TOUGH, it won’t be easy, but the end result will be historic. We will, MAKE AMERICA GREAT AGAIN!!!” China’s Foreign Ministry spokesperson, Guo Jiakun, on 5 April said the ongoing trade war between the United States and other nations is “unprovoked and unjustified” in the face of a sudden crash in the US stock markets on 4 April. The Chinese spokesperson said in a social media post: “The trade and tariff war started by the US against the world is unprovoked and unjustified.” Meanwhile, without mentioning the US reciprocal tariffs, UN Trade and Development (UNCTAD) said on 4 April: “As major economies are set to impose sweeping new tariffs, UN Trade and Development (UNCTAD) alerts that the global trade system is entering a critical phase – threatening growth, investment, and development progress, particularly for the most vulnerable economies.” “This hurts the vulnerable and the poor,” said UNCTAD Secretary-General Rebeca Grynspan. “Trade must not become another source of instability. It should serve development and global growth.” Pointing out that reciprocal tariffs will induce unpredictability and uncertainty, UNCTAD said that the least developed countries and small island developing states – responsible for just 1.6% and 0.4% of the US trade deficit, respectively – are being affected. According to UNCTAD, “trade imbalances, concentrated gains, and outdated rules must be addressed – without sacrificing those least responsible.” “This is a time for cooperation – not escalation,” Ms Grynspan said. “Global trade rules must evolve to reflect today’s challenges, but they must do so with predictability and development at their core, protecting the most vulnerable.” REORDERING OF GLOBAL TRADE ORDER? US Commerce Secretary Howard Lutnick claimed that the reciprocal tariffs announced by President Trump are directed at “reordering the global trade order.” However, several commentators argue that President Trump’s reciprocal tariffs are directed at destroying the 80-year-old trade order based on the Most-Favored-Nation (MFN) framework while the tariffs were negotiated during several rounds of trade negotiations. Further, President Trump has seemingly “killed” the preferential trade agreements while “guillotining” the “trust” in all international institutions, said a trade negotiator, who asked not to be quoted. The question that is seemingly haunting several countries is how can the US be trusted after what it did to the global trade architecture that it had created since US President Franklin D. Roosevelt’s term in office, said people who asked not to be quoted. Worse still, the reciprocal tariffs announced by President Trump are unlikely to disappear anytime soon, as they may likely be continued rather permanently under one pretext or the other, said people who asked not to be quoted. While the US reciprocal tariffs appear to be precipitating a global trade war, President Trump and his policy-makers, particularly his Treasury Secretary Scott Bessent, are now attempting to change the international financial architecture by bringing in “stablecoins” pegged to the US dollar to further “weaponize” the US dollar- based financial system and gradually shift to bitcoins and other virtual currencies. Writing in the internet publication The Wire on 26 March, this writer cautioned that the threat posed by President Trump before he announced his reciprocal tariffs is the “calculated rhetoric of an administration bent on reshaping global trade and finance in its favour.” The US could push for a “Mar-a-Lago Accord”, restructuring the international financial system through mechanisms such as bitcoin-backed virtual currencies to offset its deficits – a move that could destabilize the developing economies. +
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