US Says WTO Rules ‘Inadequate’ After Group Sides With China in Dispute

The U.S. trade representative says the WTO is unable to address the Chinese regime’s long-standing problem with overcapacity.

A picture taken in Geneva shows the logo of the intergovernmental WTO headquarters on Feb. 5, 2024. Fabrice Coffrini/AFP via Getty Images

The World Trade Organization (WTO) issued findings on Jan. 30 that upheld China’s claims that certain U.S. tax credit programs discriminated against Chinese products, drawing strong criticism from the U.S. trade representative (USTR).

“This panel report highlights what the Trump Administration has been saying for years: existing WTO rules are inadequate to address massive and harmful excess capacity in numerous sectors, including in energy technology,” USTR Jamieson Greer stated.

China challenged the Inflation Reduction Act (IRA) at the WTO in 2024, taking issue with tax credit programs that would not apply to Chinese products.

A flagship goal of the IRA, enacted by the Biden administration, was to promote domestic renewable energy investment, including the production and adoption of these technologies. As such, some of the subsidies were offered only if U.S.-made goods were used.

China challenged the programs as discriminatory in March 2024 at the WTO, and a panel was created in December 2024 to investigate.

According to WTO rules, these kinds of subsidy programs, applying only to domestic goods, are allowed under narrow circumstances, such as being “necessary to protect public morals.”

The panel found that “the United States failed to demonstrate” that this was the case.

The USTR said that the IRA was adopted with incentives for U.S. manufacturing in part because of the Chinese regime’s long-standing problem with overcapacity.

Beijing has been criticized for its overcapacity problem by other international bodies, including the European Union. The EU officially determined that China was dumping excess electric vehicles onto the European market and harming European producers, allowing it to raise significant tariffs in response.

Under the communist regime, China does not have a market economy, and production is governed by the state’s five-year plans. Industries are subsidized by the state to meet the regime’s strategic goals, sometimes resulting in overcapacity and Chinese companies’ pricing out competitors globally. Other countries have determined this creates not only economic imbalances but also serious national security risks, as exemplified by Beijing’s sweeping critical minerals restrictions in 2025.

The Chinese regime has avoided addressing these criticisms, sometimes heightening trade tensions with countries that raise the issue in response.

The USTR described the WTO’s handling of the case as “absurd.”

“Incredibly, the WTO report finds that the United States has broken WTO rules by defending industries that China unfairly targeted for global dominance, but does not say a word about the harms caused by China’s industrial policies and massive excess capacity,” Greer stated.

Instead, the panel questioned the United States’ commitment to fair markets, he said.

He said that the United States’ concern with the impact of overcapacity on fair markets has been long-standing and that the WTO report only emphasized the organization’s inability to address it.

“This report only underscores the serious doubts that the United States has long expressed regarding the capacity of the WTO to regulate trade in a world marked by severe and sustained trade imbalances,” Greer stated.

Through the WTO, China also challenged tariffs that U.S. President Donald Trump imposed in 2025. The United States stated that the tariffs are issues of national security and not subject to resolution by WTO dispute settlement.

Several of those tariffs have been paused or changed since Trump met with Chinese Communist Party leader Xi Jinping in October 2025 in South Korea.