The World Trade Organization has ruled that tariffs the US imposed on Chinese goods in 2018, triggering a trade war, were “inconsistent” with international trade rules.
The WTO said the US did not provide evidence that its claims of China’s unfair technology theft and state aid justified the border taxes.
Chinese officials welcomed the ruling.
But the US said it showed that the WTO was “completely inadequate” to the task of confronting China.
Ambassador Robert Lighthizer, America’s top trade negotiator, said the US “must be allowed to defend itself against unfair trade practices”.
“This panel report confirms what the Trump Administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices,” he said.
“Although the panel did not dispute the extensive evidence submitted by the US of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct.”
China brought the case to the WTO in 2018, as the Trump administration started preparing the first rounds of tariffs on what would eventually become more than $300bn worth of products.
The US said the duties were a response to China’s state-sanctioned technology theft, subsidies and other “unfair practices” and allowed under 1970s-era trade rules.
But China said the taxes violated trade regulations because they were higher than US commitments and targeted only one country.
A panel of WTO experts agreed with those claims. It added that the US had not proved its case that the tariffs were justified on moral grounds because it did not show how the products affected by the duties had benefited from the unfair practices.
“The panel found, accordingly, that the US had not met its burden of demonstrating that the measures are provisionally justified,” it said.
The panel added that it had only looked into the US measures and not China’s retaliation, which Washington has not challenged at the WTO.
Noting “unprecedented global trade tensions”, the three-person panel encouraged the two sides to work to resolve the overall dispute.
In a statement on Tuesday, China’s Commerce Ministry said it hoped the US would respect the rulings of the World Trade Organisation (WTO) and take practical action to maintain the multilateral trading system.
The Trump administration, which has repeatedly criticised the WTO, may appeal the decision.
But the case could then enter a legal paralysis because Washington has blocked the appointment of judges to the appellate body, preventing it from convening the minimum number required to hear cases.