For Lithuanian peat exporter Kazimiras Kaminskas, a resolution of the dispute with China cannot come soon enough as his business is hit by what the government calls Beijing's "undeclared sanctions".

Kaminskas, who heads up Klasmann-Deilmann Lietuva, has around 200 containers loaded with peat substrates that are stuck in several Chinese ports.

"When we try to clear customs and choose the country Lithuania, the system says there is an error," Kaminskas told AFP.

"For the moment, we have stopped exports to China, until the situation becomes clearer."

The dispute with China started in July last year when Lithuania allowed Taiwan to open a diplomatic outpost in Vilnius.

The move outraged Beijing, which does not recognise Taiwan as a state and considers the self-ruled democratic island a rebellious territory of the mainland.

Lithuanian business leaders have since accused China of disrupting trade in retaliation and the EU on Thursday launched a case against Beijing at the World Trade Organization (WTO).

– 'We are stuck' –

Lithuania exported 320 million euros' ($358 million) worth of goods to China in 2020 — mainly cereals, wood and wood products and furniture.

That represented only around one percent of total exports as Lithuania's main markets are much closer to home — Russia, Latvia, Poland and Germany.

But employer groups say the effects of China's actions have been more far-reaching, hitting supply chains that include Lithuanian companies.

"China is a big market with huge potential and we understand that everyone in the world is linked to China," Kaminskas said.

"As a Lithuanian patriot, I feel sorry for ordinary people who will lose their jobs after political decisions," he said.

There has also been an effect on imports from China, valued at around 1.25 billion euros in 2020.

The director of a high-tech company that buys raw materials and equipment from China said the dispute has made the future highly unpredictable.

The executive, who spoke on condition of anonymity because of commercial sensitivities, said he is still waiting for a shipment that had been due to leave Chinese ports in October.

"They say we can't ship it, systems do not allow to complete export declaration in the customs," he said.

The company is now trying to avoid Lithuania as an entry point and is seeking to ship the equipment through neighbouring Latvia.

"We are stuck. We planned to increase production from New Year, but now I don't even know when we will get the equipment — in April, May?" he said.

The executive said his company is already buying raw materials through Latvia, meaning the process has become more complex and expensive.

"Some suppliers even said 'sorry, we won't start working with you, because you are from Lithuania'".