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Trump’s Latest Salvo in His Trade War With China? Pulling Out of a 144-Year-Old Postal Pact

In his latest attempt to battle the U.S.-China trade deficit and exit multilateral agreements that don’t favor the United States, President Donald Trump began the process Wednesday to withdraw from a 144-year-old international postal agreement that lets Chinese retailers mail small packages to the U.S. for rock-bottom prices.

Senior White House officials said Wednesday that the U.S. State Department will set its own “self-declared” rates for packages from abroad. Government officials estimated the Universal Postal Union agreement costs the U.S. Postal Service about $170 million to $300 million per year and enables unfair foreign competition.

Rates set by the Universal Postal Union, an arm of the United Nations described by Planet Money as a “postal illuminati,” allow merchants to ship packages under 4.4 pounds to U.S. customers more cheaply from China than from U.S. warehouses, officials said. A 1-pound package that costs the USPS about $10 to deliver can be mailed from China for just $2.50, per White House numbers.

The heavily discounted shipping rates were meant to stimulate flagging economies, but the Trump administration says China’s status hasn’t been updated since it became an e-commerce powerhouse over the past decade, clocking about $354 billion in annual sales. An official told the Wall Street Journal, “This subsidy has basically facilitated the transfer of both a high level of counterfeit goods as well as the narcotic and fentanyl trade.”

Administration officials said they informed the Universal Postal Union that the United States intends to withdraw from the pact. Over the one-year notice period, the State Department will try to negotiate better rates for Americans or choose to walk away from the international body in 2020, the Washington Post reports.

The UPU said it regrets the move and that it plans to meet with U.S. officials about the issue. “The UPU remains committed to attainment of the noble aims of international collaboration by working with all its 192 member countries to ensure that the treaty best serves everyone,” Director General Bishar Hussein said in a statement.

Robert Taub, the head of the Postal Regulatory Commission, which oversees the USPS, told the WSJ the U.S. is well-positioned to get the rate overhaul it wants, considering it processes about 50% of global mail.

As David Z. Morris wrote for Fortune, Universal Postal Union has been a crucial piece of global infrastructure since its founding in 1874, helping coordinate rates and standards between nearly every national postal system. Postal services in the UPU agree to carry one another’s international letters and small parcels from their point of arrival to their final destinations. They then compensate each other for this service at rates set by the UPU, known as terminal dues, amended every four to five years.