China challenges Trump tariffs at WTO, package shippers warn of chaos
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China, which was subjected to an additional 10 per cent US tariffs, had vowed to challenge the step at the WTO.
PHOTO: AFP
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WASHINGTON - China filed a World Trade Organisation (WTO) complaint on Feb 5 against US President Donald Trump’s new 10 per cent tariff on Chinese imports and his cancellation of a duty-free exemption for low-value packages, arguing that the actions are “protectionist” and break WTO rules.
Beijing’s request for US trade consultations came as confusion reigned among shippers and retailers over Mr Trump’s closure of the “de minimis” exemption for package imports valued under US$800 (S$1,080) and widely used by e-commerce firms including Shein, Temu and Amazon.
A US Customs and Border Protection official said all small packages from China and Hong Kong needed to have Customs entries on file prior to arrival, and there was the potential for some cargo to be sent back without this paperwork.
The WTO said China submitted a request for consultations with the US on the tariffs.
China argues in the document that Mr Trump’s new duties aimed at halting the flow of fentanyl opioids and their precursor chemicals to the US “are imposed on the basis of unfounded and false allegations concerning China”.
It said the duties are discriminatory, applying only to goods of Chinese origin, and are inconsistent with America’s WTO obligations.
The request for consultations is the start of a dispute process that could lead to a ruling that Mr Trump’s duties violated trade rules in the same manner that a 2020 WTO ruling found that his first-term China tariffs broke trade regulations.
But such a victory would be unlikely to bring Beijing relief because the WTO’s Appellate Body has been largely inoperable for years, as the US has blocked the appointment of appellate judges over what it views as judicial overreach by the body.
This has prohibited a final decision in the 2020 case.
Package chaos
The US Postal Service (USPS) said on Feb 5 that it would again accept parcels from China and Hong Kong, reversing a temporary suspension that threatened to disrupt millions of package imports every day.
“We’re all running around like headless chickens at this moment in time, trying to second-guess what’s going to happen,” said Mr Martin Palmer, co-founder of Hurricane Commerce, a cross-border e-commerce data provider.
“And in two weeks’ time, we may be back to normal.”
The Trump administration has blamed the de minimis exemption for allowing fentanyl and its precursor chemicals to enter the US unscreened.
Recent Reuters reporting has also found that drug traffickers are exploiting the exemption.
USPS said in a statement it was working with the US Customs and Border Protection agency to implement an efficient collection mechanism for the new China tariffs to minimise disruptions to deliveries.
No Trump-Xi talks
On Feb 5, there was still no call scheduled between Mr Trump and Chinese President Xi Jinping to discuss the new US tariffs and Beijing’s retaliatory measures, a person familiar with the matter told Reuters.
Mr Trump said on Feb 4 he was in no hurry to speak with Mr Xi as the tariff took effect just after midnight Eastern Time.
China responded with targeted tariffs on imports of US coal, liquefied natural gas, crude oil and farm equipment, and opened an anti-monopoly investigation into Alphabet’s Google.
The launch of the new trade war caught the retail and shipping sectors flat-footed.
“There has really been absolutely zero time for anyone to prepare for this,” said Ms Maureen Cori, co-founder of New York-based consultancy Supply Chain Compliance.
“What we really need is direction from the government on how to handle this without warning or notice.”
Currently, de minimis parcels are consolidated so Customs can clear hundreds or thousands of shipments at once, but they will now require individual clearances, significantly increasing the burden for postal services, brokers and Customs agents, Ms Cori said.
The provision was initially intended as a way to streamline trade, and its use has surged with the increase in online shopping.
About 1.36 billion shipments entered the US using the de minimis provision in 2024, up 36 per cent from 2023, according to US Customs and Border Protection data.
Tariff uncertainty
US Treasury Secretary Scott Bessent on Feb 5 defended Mr Trump’s tariff strategy in his first media interview since taking office, saying it was aimed at bringing manufacturing back to the US, including for industries that have largely left US shores.
US Federal Reserve officials on Feb 5 pointed to the large policy uncertainty around tariffs and other issues arising from the early days of Mr Trump’s administration as among the top challenges in figuring out where to take US monetary policy in the months ahead.
Chicago Fed president Austan Goolsbee warned that ignoring the potential inflationary impact of tariffs would be a mistake.
Richmond Fed president Thomas Barkin said it remains impossible at this early stage to know where cost increases from any tariffs might be absorbed or passed along to consumers. REUTERS
