China has invoked trade rules as a 500-per cent anti-dumping and anti-subsidy duties imposed by the United States on imports of some steel products from China to stem exports of the country's low-priced steel.
China's commerce ministry, on the other hand, alleged that steel mills in the world's largest economy are overprotected and therefore lack competitiveness even at home.
China is worried that the US move will further exacerbate trade tensions for China, which is facing a trade backlash across the West. The problem with China's trade is it doesn't buy, it only sells, and this is worrying its trade partners across the world.
The world is awash with steel with little improvement in demand and with consumption dropping even in China, which accounts for about half of global production, Chinese steel mills are dumping products everywhere.
China's commerce ministry, however, said protectionism in the US steel sector is to blame for the current state of affairs and that the US move will only exacerbate friction without helping to solve the problem of shrinking global demand.
''China believes that the lack of competitiveness in the US steel industry is the result of over-protection,'' it said.
China is not alone, even Japan is facing problem in selling steel to the US. Chinese mills have boosted exports to record levels, raising trade tensions worldwide, spurring a fightback from rival producers and forcing policy makers to try to address the problem, including at May's Group-of-Seven meeting in Japan.
''China urges the US to abide by the World Trade Organization's rules and to use trade remedy measures judiciously,'' the commerce ministry said after the US ruling from the International Trade Commission, a federal body.
The US, on the other hand, claims it has been ''materially injured'' by imports of the cold-rolled steel flat products from China, as well as Japan, which have been determined to be sold at less than their fair value and subsidized," the ITC said in a statement on Wednesday. All six of the ITC's commissioners backed the move, it said.
A revival in steel prices in China earlier this year spurred mills to fire up capacity, prompting Axiom Capital Management Inc to predict that the country's exports will probably stay elevated. Exports of steel from China will remain at high levels as local demand shrinks, the country's Metallurgical Planning Institute said in April.
The Chinese government has announced plans to cut as much as 150 million tonnes of excess steel-making capacity over five years, in a bid to tackle a global glut. But the country has not taken any substantial measures to tackle oversupply, according to Shinzo Abe, Japan's prime minister who hosted G-7 leaders in May
For the US steel industry the anti-dumping measure is a major victory. Washington decided to hit Chinese steelmakers with tariffs of more than 500 per cent after the US International Trade Commission found cold-rolled steel products from China and Japan, which the United States imported $431.6 million of last year, were unfairly subsidised and sold for less than fair value.
Imports of cheap Chinese steel affected the steelmaking operation at ArcelorMittal's Burns Harbor plant, among others, leading the US Department of Commerce to increase tariffs on unfairly subsidised steel from China and Japan.