Under Wednesday's announcement, the US State Department will seek new bilateral and multilateral agreements that address Trump's criticism.
Trump administration officials say the leg up, granted under a 1969 provision, was meant to promote growth in poor countries.
Singapore and European countries also benefit from the arrangement.
China has said it regrets the United States' decision to withdraw from the Universal Postal Union (UPU), in a move some analysts said is further evidence of Washington trying to curtail Beijing's rise. President Donald Trump's administration said the treaty has proven unfair to US business because Chinese shippers pay 20 cents for every $1 American companies pay to distribute packages in the United States.
The United States intends to exit the system of setting postal rates for smaller packages under the Universal Postal Union "as soon as practical" and no later than January 1, 2020, said a statement released by the White House press secretary.
China, for instance, accounts for a large portion of the flow, but there are also other countries involved and other posts involved, the official said.More news: Top Afghan Police Chief Killed in Kandahar Shooting, US General Unhurt
The U.S.is willing to renegotiate the treaty over the next year but will leave the union if no agreement can be reached, the officials said. The biggest winners could be shipping carriers such as UPS. "I don't think it's that important at all, but it shows that Trump is obsessed with China's power and will do anything to limit it". "It is often possible for a Chinese company to sell "knockoff" products through online vendors, such as Amazon or Alibaba, to US consumers for less than it costs for American mailers to ship authentic goods". While the agreement is meant to give Asian and African countries incentives to develop their economies, China has used the discounted rates so effectively that it now accounts for 60 percent of the packages sent to the U.S. "Moreover, while USPS loses an estimated $1 on every small package that arrives from China, outbound mail of American exporters is charged at well above cost".
The "system creates winners and losers", the report's author's concluded, especially China's national postal service and "Chinese online retailers in the lightweight, low-value package segment at the expense of the U.S. Postal Service and American retailers".
The price of shipping a 4.4-pound package, the largest parcel covered by the treaty, from China to the United States is about $5, according to US estimates.
In his latest attempt to battle the U.S.
The president argues the US loses as much as $800 billion in cash going to China every year as a result of the trade imbalance between the two countries. "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.
"Something has to be done", he said.