Trump’s Tariffs Shake Global Trade, WTO Remains Resilient

Trump's Tariffs: A Major Test for the WTO and Global Trade

In his second term, US President Donald Trump has imposed significant tariffs on imports, starting with a 25% levy on Canadian and Mexican goods and a 10% tariff on imports from the Chinese mainland from February 1, 2025. These measures have been extended to steel and aluminum, with additional reciprocal tariffs, including a potential 25% tax on automotive imports. The tariffs have met strong opposition from the Chinese mainland, Canada, Mexico, and the European Union, with the European Commission even threatening retaliation. US Senate Minority Leader Charles Schumer has criticized Trump's approach as \"the most stupid trade war in history.\"

Challenging the World Trade Organization

Trump's tariff actions represent the most significant challenge to the World Trade Organization (WTO) and its multilateral rules since the establishment of the General Agreement on Tariffs and Trade in 1948. Central to the WTO system is the principle of non-discriminatory trade and unconditional Most-Favored-Nation treatment, both of which Trump's tariffs violate. Additionally, the WTO rejects the concept of \"reciprocal tariffs,\" a strategy Trump has pursued without organizational support.

By effectively paralyzing the WTO's Appellate Body, Trump has circumvented the organization's oversight, preventing legal challenges to his tariff measures. The scale and severity of these tariffs undermine the WTO's core principles and threaten global trade stability, drawing parallels to the detrimental Smoot-Hawley tariffs of the 1930s.

Flawed Justifications for Tariff Measures

Trump's justifications for these tariffs have been widely criticized as flawed:

1. Stopping illegal immigration and fentanyl: These issues have no direct link to trade, particularly with the Chinese mainland.
2. Protecting US industry: Steel and aluminum tariffs did not boost US industry during Trump's first term, and US manufacturing remains sluggish.
3. Reducing trade deficit: Despite the imposition of tariffs, the US trade deficit increased substantially under Trump's policies.
4. Fair trade: Reciprocal tariffs are seen as thinly veiled unilateral tariffs, violating WTO principles.

Economic Consequences of the Tariff War

Trump's tariffs have already had damaging effects on the US economy:

1. Tariffs are paid by US importers, who ultimately pass the costs onto consumers and manufacturers.
2. The Peterson Institute for International Economics estimates that Trump's trade war will cost each American family $1,200 annually.
3. Bloomberg estimates that US imports could drop by 55%, and exports by 30 to 60%, should retaliation intensify, evoking the trade collapse seen during the Great Depression.

Resilience of the WTO and Global Trade

Despite Trump's aggressive tariff policies, the WTO and global trade remain resilient:

1. The US accounts for only 12.9% of global trade, and even if its imports were completely tariffed, the majority of global trade would remain unaffected.
2. The US is just one of 164 WTO members, and the overwhelming majority continue to support the WTO's rules and mechanisms.
3. In 2023, global trade reached $30.4 trillion, with growth driven by middle- and low-income countries, reflecting the enduring strength of the WTO and the multilateral trading system.

These trends indicate that the WTO and global trade are far from being toppled and will continue to thrive despite the challenges posed by Trump's tariff policies.

Reference(s):

Trump's tariff measures do not shatter WTO and world trade

cgtn.com