Trump’s Trade Policies: A Threat to the Global Rules-Based Order

January 8, 2025

The re-election of Donald Trump as President of the United States could have profound implications for the global trade framework. Over the past 75 years, the United States has played a pivotal role in creating and maintaining a rules-based multilateral global trade order. However, Trump’s approach to trade policy threatens to undermine this system, potentially leading to a more chaotic and power-driven international trade environment. Trump’s trade policies represent a significant departure from established norms, thereby raising concerns about the stability and predictability of future international trade.

Historical Context of the Global Trade System

The current global trading system was established through the General Agreement on Tariffs and Trade (GATT), which later evolved into the World Trade Organization (WTO). This system was founded on the principles of non-discrimination and reciprocity, aiming to create a fair playing field for countries of varying economic sizes and ensure balanced negotiations. Under the Most-Favored-Nation (MFN) rule, countries cannot discriminate between trading partners, and reciprocity ensures that the benefits and concessions in trade are mutual and balanced. The WTO has been instrumental in facilitating significant trade growth and poverty reduction worldwide. By providing a predictable and stable framework for international trade, it has enabled countries to engage in mutually beneficial trade relationships. However, recent trends in US trade policy have raised concerns about the future of this system.

The principles of the GATT and subsequently the WTO led to a period of substantial global economic integration. Countries were able to depend on a consistent set of rules that applied uniformly, reducing barriers to entry for smaller nations and promoting economic collaboration. However, the increased skepticism toward these principles, notably under the Trump administration, has cast doubt on the continued effectiveness of this system. Critics argue that deviation from these rules could result in a fragmented trade environment where power, rather than mutual benefit, dictates trade relationships.

Recent US Administrative Practices

Both the Trump and Biden administrations have exhibited disregard for the WTO’s rule-based system. The Trump administration notably refused to fill vacancies in the WTO’s Appellate Body, a practice that continued from the Obama administration, effectively paralyzing the organization’s dispute settlement system. This move undermined the WTO’s ability to enforce its rules and resolve trade disputes, weakening the overall effectiveness of the global trade system. The Biden administration has also extended some of Trump’s trade policies, showing a continued trend of deviating from established global trade norms. For example, the Biden administration has maintained tariffs on Chinese goods and has pursued a more protectionist trade policy. This bipartisan trend raises concerns about the long-term commitment of the United States to the rules-based global trade order.

One of the most significant aspects of this shift has been the move towards unilateral actions rather than multilateral negotiations. By imposing tariffs and other trade barriers outside the framework of the WTO, these administrations have signaled a willingness to prioritize immediate national interests over long-term global stability. This approach has prompted other countries to adopt retaliatory measures, leading to a cycle of increasing trade barriers that undermine the open markets the WTO aims to promote. The reluctance of the US to engage constructively with the WTO’s dispute resolution mechanisms further erodes trust in the institution’s ability to manage global trade conflicts effectively.

Trump’s Vision for Global Trade

Trump’s approach to global trade fundamentally deviates from the principles of the WTO. His administration proposed a system where countries would match the highest tariffs of other countries, abandoning the MFN principle. This proposed system would prioritize power dynamics over rule-based negotiations, allowing larger countries to exert more influence and potentially leading to destabilizing inequalities within the global trade framework. Trump’s vision for global trade also extends the use of tariffs beyond traditional trade negotiations. For instance, he has used tariffs as a tool to address issues like immigration regulation, production of fentanyl precursors, and the role of the US dollar in the global economy. This approach represents a significant departure from the established norms of international trade and raises concerns about the potential for increased tensions and instability in global trade relationships.

The implications of abandoning the MFN principle are profound. Smaller nations would find themselves at a disadvantage, unable to compete on equal footing with larger, more economically powerful countries. This shift to a power-based system could lead to the marginalization of smaller economies, reducing their ability to benefit from global trade. Furthermore, by linking tariffs to non-trade-related issues, Trump’s policies threaten to complicate international relations, making it harder to resolve disputes through traditional trade negotiation channels. The use of tariffs as a tool for achieving a wide range of policy goals blurs the lines between trade policy and other areas of governance, creating a more volatile and less predictable international trade environment.

Implications of Trump’s Approach

The shift from a rules-based to a power-based system threatens to undermine the global trade order. Smaller countries could face exploitation, the bargaining process could become more contentious, and the overall predictability and stability that the WTO system offers could be eroded. This could lead to a more chaotic and unpredictable international trade environment, with increased tensions and conflicts between countries. The erosion of trust in multilateral institutions would further hinder cooperation on global challenges, potentially leading to a fragmented world where economic power plays a more dominant role in shaping trade relations.

Trump’s approach also has implications for the internal dynamics of US trade policy. His view of tariffs as bargaining chips indicates a potential for internal bargaining within the US, where domestic interests might negotiate for exceptions or concessions regarding trade policies. This could complicate the trade policy landscape, making it unpredictable and driven by disparate interests rather than cohesive national policies. Domestic industries might push for favorable tariff adjustments, leading to a patchwork of trade policies that reflect the influence of various interest groups rather than a unified national strategy. This internal fragmentation could undermine the ability of the US to present a coherent approach to international trade, weakening its position in global negotiations.

Overarching Trends and Consensus Viewpoints

There is a consensus that both recent Democratic and Republican administrations have been complicit in eroding the WTO’s functionality, but Trump’s explicit and aggressive stance against the WTO’s principles presents a unique and significant threat. By condensing the analysis of both Trump and Biden administrations’ disregard for the WTO rules into unified points, the summary avoids redundancy. It combines the historical context and the principles of the global trade system into a single cohesive narrative, eliminating repetitive explanations of the implications and trends. The summary provides a clear, consolidated understanding of the threat posed by Trump’s trade policies. It reflects on the nuances and diversity of perspectives, acknowledging that while disrespect for WTO rules has been a bipartisan issue in the US, Trump’s administration represents a more disruptive deviation.

In recognizing the bipartisan nature of the shift away from WTO principles, it becomes clear that the challenges to the global trade system are not limited to the policies of a single administration but reflect broader changes in US trade policy. This continuity suggests a deeper reevaluation of the US’s role in the global trade system, raising important questions about the future direction of international economic governance. Addressing these issues will require a commitment to restoring trust in multilateral institutions and reaffirming the principles of non-discrimination and reciprocity that have underpinned global trade for decades.

Potential Internal Bargaining

If Donald Trump is re-elected as President of the United States, it could have significant consequences for the global trade framework. For the past 75 years, the United States has been instrumental in establishing and upholding a rules-based multilateral trade system that has fostered international economic cooperation and growth. Trump’s trade policies, however, diverge sharply from this established norm, raising serious questions about the future stability and predictability of global trade. His approach suggests a shift towards a more chaotic, power-driven environment where established rules may be ignored or rewritten, impacting countries around the world. The potential shift from cooperation to confrontation in global trade could lead to higher tariffs, increased trade barriers, and a focus on bilateral rather than multilateral agreements. This change could undermine the progress made in global trade over the decades, resulting in a less stable and predictable international economic landscape. Thus, Trump’s re-election threatens to reshape the global trade order in ways that could bring uncertainty and instability.

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