On Tuesday a panel of three trade experts said the United States violated global rules when it imposed tariffs on Chinese goods in 2018.
China also alleged the duties broke a key dispute-settlement rule that requires countries to first seek recourse from the WTO before imposing retaliatory measures against another country.
"The United States must be allowed to defend itself against unfair trade practices, and the Trump administration will not let China use the WTO to take advantage of American workers, businesses, farmers, and ranchers", US Trade Representative Robert Lighthizer said in a statement.
The ruling, in theory, would allow China to impose retaliatory tariffs on billions' worth of USA goods. But the USA government can appeal the decision announced by the WTO's dispute settlement body, and the WTO's appeals court is now no longer functioning - largely because of Washington's single-handed refusal to accept new members for it.
"Panel recommends that the United States bring its measures into conformity with its obligations.", the report said. That is because the Trump administration has already paralysed the WTO's appellate body, a tactic that has rendered toothless the world's foremost arbiter of trade.
President Donald Trump justified the China tariffs by citing a 1974 law allowing the president to impose tariffs and other restrictions on imports in retaliation for unfair trade practices and other tactics that disadvantage the U.S. commercially, insisting the levies were necessary to counter China's allegedly rampant violation of intellectual property rights, particularly in the technology sector.
The Chinese ministry of commerce said the ruling was "objective and fair" and called on the U.S.to respect it.
The three-person panel affirmed the tariffs, which Washington has broadened to cover $550 billion in Chinese exports, violated two GATT provisions and stated that the United States has not justified their necessity under a third provision. An additional 25% duties were imposed in June 2018 against Chinese goods worth about $34 billion in annual trade. Trade Representative Robert Lighthizer insisted the USA must be allowed to "defend itself" against unfair trade practices and maintained the ruling would not affect Phase I of the proposed trade agreement between the U.S. and China. The U.S. argued that China's actions had amounted to "state-sanctioned theft" and "misappropriation" of U.S. technology, intellectual property and commercial secrets.
While the ruling bolsters Beijing's claims that Trump's trade war skirted WTO rules, Washington can effectively veto the decision by lodging an appeal at any point in the next 60 days.