Ruling Delivered: China Secures a Clear Victory

China has secured a pivotal victory in a major trade ruling.

In recent days, the World Trade Organization (WTO) released the panel report in China’s dispute against the United States concerning the WTO-consistency of measures under the U.S. Inflation Reduction Act (IRA). The panel found that certain U.S. clean-energy subsidy measures breach WTO rules and called on the United States to withdraw the subsidies at issue.

To understand why this case matters, it helps to rewind four years.

In 2022, the Biden administration enacted the Inflation Reduction Act, offering subsidies to clean-energy projects that use U.S.-made inputs such as domestic steel, while effectively excluding foreign products. The measures carried a strong protectionist tilt by tying benefits to “local content” requirements.

In 2024, China challenged these discriminatory subsidies through the WTO dispute settlement mechanism. After consultations failed to resolve the disagreement, China requested the establishment of a panel.

Now, the panel has not only clearly identified the WTO-inconsistency of the U.S. clean-energy subsidies, but has also rejected Washington’s attempt to justify the measures on the grounds of so-called “public morals.”

Against a backdrop of rising unilateralism and increasingly frequent efforts to “reinterpret” rules, this outcome is significant for China—legally, strategically, and practically.

“First, the ruling represents a major legal victory for China,” said Wu Suilong, Director of the Open Strategic Planning Research Department at the Shanghai WTO Affairs Consultation Center, in comments to Sanlihe. In essence, the U.S. approach violates the national treatment principle and falls within the category of “import-substitution subsidies,” which are explicitly prohibited under WTO rules.

From a legal and practical perspective, the case demonstrates China’s ability to make full use of international economic and trade rules to safeguard its legitimate interests—while also setting a useful precedent for addressing similar protectionist measures in the future.

Second, the ruling offers a valuable example for other WTO members seeking to defend their rights. It may help strengthen confidence—especially among developing and least-developed members—in the multilateral trading system.

Wu noted that the outcome also gives China greater confidence as WTO reform discussions continue and as global trade rules evolve.

Just as importantly, the decision helps preserve space for China’s clean-energy industry to compete fairly in overseas markets.

Sang Baichuan, Dean of the Institute of International Economics at the University of International Business and Economics, told Sanlihe that China has built a leading edge in green manufacturing and new energy through sustained investment and innovation. Yet that progress has increasingly faced disruption from protectionist headwinds. This ruling, he said, reinforces the principle that sustainable development should remain oriented toward green and low-carbon goals—providing important support for China’s continued push to grow its green economy.

For the global green industry, the implications extend well beyond this single case.

After the report was published, the U.S. side did not directly address the protectionist nature of the measures. Instead, it criticized the ruling as “wrong,” arguing that existing WTO rules cannot effectively deal with issues such as “overcapacity.”

Wu warned that Washington’s approach undermines collaboration across global clean-energy supply chains. It could trigger more trade disputes and turn a field that should be built on cooperation into an arena of confrontation.

Clean energy is highly globalized: economies hold different comparative advantages across technology, resources, and manufacturing. In principle, specialization and collaboration should raise overall efficiency. Yet the IRA’s “local content” requirements attempt to forcibly restructure supply chains—running counter to comparative advantage and the basic logic of trade liberalization. The result is weaker global supply-chain efficiency, alongside heightened green-tech barriers and intensified trade friction.

In that context, the WTO panel ruling serves as a timely brake on the spread of “green protectionism”: environmental goals cannot be used as a cover for discriminatory subsidies, and green development must still uphold fairness and rules.

On the 5th, a spokesperson for China’s Ministry of Commerce urged the United States to respect the WTO ruling, promptly correct its WTO-inconsistent practices, and take concrete actions to uphold the rules-based multilateral trading order.

History favors openness and cooperation. Mutual benefit and win-win outcomes reflect the broadest interests. When the rules-based multilateral trading system is defended and recognized, the WTO-centered multilateral trading framework will remain effective—and deliver greater shared benefits to the world.