Under the union's framework it takes a year for a country to withdraw, during which rates can be renegotiated.
A 2015 report from the Inspector General of the U.S. Postal Service found that the treaty, which was created to ease the flow of mail and small parcels between 192 countries, had not been overhauled to reflect the new realities of e-commerce and China's aggressive undercutting of global competitors.
President Trump argues the growth in Chinese exports to the USA has destroyed American jobs. The officials say the treaty is used by shippers of the narcotic fentanyl to the US from China.
The withdrawal, announced by the White House on Wednesday, is part of a concerted push by Trump to counter China's dominance and punish it for what the administration says is a pattern of unfair trade practices.
A senior White House official said the State Department formally notified the Universal Postal Union, a coalition of 193 countries, that the US intends to withdraw from the pact within 12 months if the administration can't negotiate more favorable shipping rates. The result could be an increase in prices on many household goods, consumer electronics, and clothing if a new rate schedule is not agreed upon.
"President Trump deserves tremendous credit for the administration's focus on eliminating the anti-US manufacturer subsidy China receives from the U.S. Postal Service", Jay Timmons, the president of the National Association of Manufacturers, said in a statement.
President Donald Trump plans to withdraw the USA from a 192-nation treaty that gives Chinese companies discounted shipping rates for small packages sent to American consumers, another escalation of his economic confrontation of Beijing. It also comes amid an escalating trade dispute between Beijing and Washington that has resulted in US imposition of tariffs on about $250 billion worth of Chinese goods and the Chinese retaliating with similar punitive taxes on about $110 billion in American products.
The U.S. and China are already locked in a trade war. "In that context, whether or not China is labeled a currency manipulator does not seem particularly important".
Under the current UPU system, a one-pound package shipped by a US business costs between $10 to $13.
Consequently, U.S. consumers often purchase Chinese goods offered with free shipping.
Giving an example, the official said a one-pound package costs domestically about $10 to $13 for a USA business or manufacturer to send, whereas the Chinese mailer, for the last mile, and same distance, one would reimburse about $2.50.
The losses to retailers and manufacturers could be much more, as online commerce expands further. "These pose major challenges to achieving fairer and more balanced trade and we will continue to monitor and review China's currency practices including through ongoing discussions with the People's Bank of China", Mnuchin said in a statement accompanying the report. "How can my government be subsidizing China and driving me out of business?"