Stock Futures Drop As China Asks WTO To Approve US Trade Sanctions

"Shape up" indeed...

Just weeks after China filed a complaint with the WTO over the US's Section 201 tariffs on solar panel imports (which Trump imposed back in January, months before the US-China trade spat began in earnest), China is apparently turning up the pressure. According to a Reuters report, China will ask the WTO during a meeting next week for permission to impose sanctions against the US after accusing it of noncompliance with a 2013 anti-dumping ruling. Reuters, which cited a WTO meeting agenda as its source for the news, said China is alleging that the US failed to modify anti-dumping methodologies to comply with the 2013 ruling.

China

The news sent US equity futures tumbling early Monday morning...

  • *CHINA TO ASK WTO TO AUTHORIZE TRADE SANCTIONS ON U.S: RTRS
  • *CHINA REQUEST FOR SANCTIONS RELATES TO '13 DUMPING DISPUTE:RTRS

Here's more from Bloomberg:

  • On Sept. 21, China will ask the WTO dispute settlement body to sanction trade retaliation against the U.S. for its failure to comply with a 2017 dispute ruling that found certain aspects of the U.S. anti-dumping regime to be illegal
  • China previously claimed that it could ask the WTO to approve $8.4 billion in annual retaliatory trade measures against the U.S. stemming from the case
  • This year a WTO arbitrator determined that the U.S. must comply with the 2017 ruling by Aug. 22
  • The U.S. acknowledged on Aug. 27 that it had not fully complied with the ruling and said it “continued to consult with interested parties on options to address the recommendations” of the dispute settlement body

The request will likely lead to years of legal wrangling, per Reuters.

The request is likely to lead to years of legal wrangling over the case for sanctions and the amount. Last year China won a WTO ruling in the dispute, which related to several industries including machinery and electronics, light industry, metals and minerals, with an annual export value of up to $8.4 billion.

As one analyst pointed out, this is likely a strategic decision on China's part given that it doesn't have as much leverage to impose tariffs on US imports because of its massive trade surplus with the US.

"I guess they are trying to pursue other avenues to hit back and this is one of them. Certainly something that will trigger some nervousness in markets should they actually go through with it once the US announces those tariffs. For now, they're still "playing by the rules" and going through the WTO so let's see how things will develop from here," said Justin Low at ForexLive.

Meanwhile, in remarks that appear to cut against the aggressive posturing on trade, the head of China’s market regulator said on Tuesday that a trade war would not benefit China or the US - and that tensions could only be resolved via "dialogue and negotiation," according to a separate Reuters report.