China violated global trade rules with duties on cars imported from the United States, the World Trade Organisation said in a ruling that added to mounting commercial tensions between the world's two largest economies.
China improperly imposed tariffs on imported vehicles, including those made by General Motors and Chrysler, the WTO ruled in a decision issued yesterday. China added the duties in 2011, after the US government bailed out car makers during the global financial crisis, and eliminated them in December.
"This is a significant victory," US Trade Representative Michael Froman said. "It's time for China to change the practices that have led the United States and our trading partners to bring these kinds of cases."
The US last week escalated the trade battle with China, accusing five military officers of stealing corporate secrets. The indictments follow complaints over issues such as tyres, chicken parts, clean-energy products and credit-card payment services.
The Chinese embassy in Washington claimed victory on technical aspects of the case.
"We noticed that the panel report rejected part of the United States' argument that China failed to define the domestic industry," said spokesman Geng Shuang.
The Ministry of Commerce in Beijing said it had "reservations about the panel's rulings on such issues as the calculation of dumping margins and price effects".
In response to a 2012 US complaint, the WTO found China failed to show how the goods harmed the Chinese market and did not disclose to US companies how the tariffs were calculated.
China imposed duties, as high as 21.5 per cent, on US-made cars and SUVs in December 2011, claiming the goods benefited from government subsidies and were "dumped" in China - meaning they were sold for less than their market value.
The tariffs followed the forced bankruptcy and government bailout of GM and Chrysler in 2010.
"We commend both countries for utilising the WTO's process to resolve a trade dispute," Heather Rosenker, GM's director of public policy and government relations communications, said.
The value of the goods at issue - including Chrysler's Jeep Grand Cherokee and GM's Buick Enclave and Cadillac Escalade - was about US$5.1 billion last year, according to the US trade office. China is the second-largest export market for US cars. In September 2012, the US filed a separate WTO case against China alleging Beijing subsidised its own car and car-parts makers. That case is still under review.