China challenges Trump tariffs at WTO

China filed a World Trade Organization complaint on Wednesday against U.S. President Donald Trump’s new 10% tariff on Chinese imports and his cancellation of a duty-free exemption for low-value packages, arguing the actions are “protectionist” and break WTO rules.

Beijing’s request for U.S. trade consultations came as confusion reigned among shippers and retailers over Trump’s closure of the “de minimis” exemption for package imports valued under $800 and widely used by e-commerce firms including Shein, Temu (PDD.O), opens new tab and Amazon (AMZN.O), opens new tab.

A 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, opens new tab with the U.S. on the tariffs. China argues in the document that Trump’s new duties aimed at halting the flow of fentanyl opioids and their precursor chemicals to the U.S. “are imposed on the basis of unfounded and false allegations concerning China.”

It said the duties are discriminatory, only applying to goods of Chinese origin, and are inconsistent with the U.S.’s WTO obligations.

The request for consultations is the start of a dispute process that could lead to a ruling that 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 U.S. 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 U.S. Postal Service said on Wednesday 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 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.”

Read more: Trump pauses tariffs on Mexico and Canada, but not China

The Trump administration has blamed the de minimis exemption for allowing fentanyl and its precursor chemicals to enter the U.S. unscreened. Recent Reuters reporting has also found that drug traffickers are exploiting the exemption.

USPS said in a statement it was working with the U.S. Customs and Border Protection agency to implement an efficient collection mechanism for the new China tariffs to minimize disruptions to deliveries.

NO TRUMP-XI TALKS

On Wednesday, there was still no call scheduled between Trump and Chinese President Xi Jinping to discuss the new U.S. tariffs and Beijing’s retaliatory measures, a person familiar with the matter told Reuters.

Trump said on Tuesday he was in no hurry to speak with Xi as the tariff took effect just after midnight Eastern Time.

China responded with targeted tariffs on imports of U.S. coal, liquefied natural gas, crude oil and farm equipment, and opened an anti-monopoly investigation into Alphabet’s (GOOGL.O), opens new tab 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 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, 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 United States using the de minimis provision in 2024, up 36% from 2023, according to U.S. Customs and Border Protection (CBP) data.

TARIFF UNCERTAINTY

U.S. Treasury Secretary Scott Bessent on Wednesday defended Trump’s tariff strategy in his first media interview since taking office, saying it was aimed at bringing manufacturing back to the U.S., including for industries that have largely left U.S. shores.

U.S. Federal Reserve officials on Wednesday pointed to the large policy uncertainty around tariffs and other issues arising from the early days Trump’s administration as among the top challenges in figuring out where to take U.S. monetary policy in the months ahead.

Chicago Fed President Austan Goolsbee warned that ignoring the potential inflationary impact of tariffs would be a mistake, whereas 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.