The World Trade Organisation (WTO) has authorised China to impose punitive tariffs against the US after ruling the duties on steel and other products were illegally inflated by the US.
It means China could now levy $3.6bn worth of tariffs on American goods with WTO arbitrators saying the “countermeasures” could be imposed as early as this month.
Such action could create new tensions between the world’s largest economies as they near a truce in their 16-month trade war.
The decision comes as both parties look for a new venue to sign their ceasefire following the cancellation of the Asia-Pacific Cooperation meeting in Chile due to civil unrest.
“The deal is not complete but we’ve made enormous progress,” Larry Kudlow, the director of the White House’s national economic council, said on Friday.
The office of the United States trade representative Robert Lighthizer and Steven Mnuchin, the US Treasury secretary, had a “constructive” call with China’s vice-premier, Liu He, on Friday.
“They made progress in a variety of areas and are in the process of resolving outstanding issues,” the USTR said.
The punitive tariffs authorised by the WTO are just a fraction of the retaliation tariffs already imposed by China, but if applied would likely escalate tensions.
It is the first time China has been authorised to impose tariffs on any country in retaliation since joining the WTO almost 20 years ago.
The ruling against the US relates to the way the country calculates anti-dumping duties. China are among the countries to have challenged a methodology called “zeroing” used by Washington to try to increase duties on imports — particularly steel.
A US official said it was “disappointed” by the WTO decision but did not believe it would impact trade talks.
“The administration will be actively consulting within the US Government and with stakeholders on how to move forward. Nothing in the arbitrator’s decision, however, will undermine the commitment of the United States to using antidumping duties to address injurious dumping,” the official said.