TWN Info Service on WTO and Trade Issues (Mar25/01)
3 March 2025
Third World Network

Trade: Global trade war imminent against Trump’s unilateral tariffs?
Published in SUNS #10173 dated 3 March 2025

Geneva, 28 Feb (D. Ravi Kanth) — A global trade war appears to be almost at the proverbial doorstep of several leading capitals, after United States President Donald Trump announced that his proposed unilateral tariff of 25% on all goods from Canada and Mexico shall go into effect on 4 March over their alleged failure to curb drug smuggling, according to a post on his social media website on 27 February.

President Trump announced that China shall be subjected to an additional tariff of 10% over and above the 10% tariff on all Chinese goods that had already come into effect on 4 February.

Writing in his social media website Truth Social on 27 February, Trump reiterated that “the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled.”

“China will likewise be charged an additional 10% Tariff on that date,” President Trump said, in what appears to be a response to China’s retaliatory move to impose tariffs on American goods worth around $14 billion, said people familiar with the development.

President Trump on 26 February appeared to create some confusion when he said that the tariffs on all goods from Canada and Mexico will be delayed till 2 April, which he later rectified.

In addition to Canada, Mexico, and China, President Trump appears to have also taken the European Union to the brink of a trade war by announcing that he plans to impose a tariff of 25% on imports of auto and other products from the EU member countries.

During his first cabinet meeting on 26 February, he told reporters that “we have made a decision. We’ll be announcing it very soon, and it’ll be 25% generally speaking, and that will be on cars and all of the things.”

President Trump seemingly accused Brussels, arguing that the “European Union was formed in order to screw the United States. That’s the purpose of it, and they have done a good job of it. But now I’m President.”

President Trump’s commerce secretary Howard Lutnick went on to say with respect to Canada and Mexico that “the fentanyl-related things, if they’re working hard on the border, at the end of that 30 days, they have to prove to the president that they’ve satisfied him to that regard.”

In response, President Trump said that it was “going to be hard to satisfy.”

It remains to be seen whether China will retaliate against President Trump’s latest decision on tariffs or will settle for negotiating an initial deal.

The latest announced duties have raised the average duty rate on Chinese imports to 24.5% from about 14.5% as of 2023, according to Gavekal Dragonomics, an economics consulting firm, as reported in the Wall Street Journal.

RECIPROCAL TARIFF PLAN

Meanwhile, the proposed unilateral reciprocal tariff plan to be announced by President Trump on 2 April could turn the “custodian” of the multilateral trading system i.e., the World Trade Organization on its head for years to come, said people familiar with the development.

Such a plan to be announced by President Trump seems like a direct challenge to the 166 WTO members as to whether they can stand up to the unprecedented “bullying” and “naked capture” of critical raw materials in order to accomplish the goals set out in his “America First Trade Policy”, said people familiar with the development.

The reciprocal tariff plan appears to be an assault on the rules governing global trade that were framed in successive rounds of trade negotiations at the WTO in which the US was a principal participant, said people familiar with the development.

So far, the response from the WTO’s Director-General, Ms Ngozi Okonjo-Iweala, to President Trump’s proposed actions, was seemingly couched in “a barrage of inanities”, said people familiar with the development.

In her statement (Job/GC/420) at the WTO’s General Council (GC) meeting on 18-19 February, the DG said that the “key message I have shared is that amid the current uncertainties, we must maintain cool heads and remain open to dialogue.”

Acknowledging the concerns expressed by several members about the recent developments, she said: “The changes we are witnessing are significant, and they reinforce the importance of this institution as a forum for dialogue and cooperation.”

It is somewhat intriguing how the DG can ask members to stay calm and enter into a dialogue when a proverbial hammer is being used by the world’s largest economy to unilaterally impose tariffs in alleged utter disregard for the WTO rules, said people familiar with the development.

In her statement, the DG said that her “message remains the same and remains clear: in times of uncertainty, it is essential to remain calm, engage constructively, and avoid steps that could lead to an escalating cycle of trade restrictions.”

According to Ms Okonjo-Iweala, “open and transparent dialogue is the best way to navigate challenges and prevent tensions from deepening.”

But when there is little or no room for “open and transparent dialogue” as demonstrated by President Trump, is it wise to expect that a dialogue can take place, said people familiar with the development.

In response to queries from members about “reciprocal tariffs”, Ms Okonjo-Iweala said: “As you know, this is a Member-driven organization and Members will have exchanges with each other.”

With respect to the reciprocal tariffs, she merely said: “We have been, at the Secretariat, upgrading the database which we call the Tariff Analysis Online Database. Based on your feedback, the new database will be renamed “WTO Tariff and Trade Data” and will be launched in the Committee on Market Access on 4 March.”

The DG said, “as we move forward, it is imperative that we continue to strengthen the multilateral trading system, ensuring that it remains a source of stability and opportunity for all Members,” a response that seems somewhat irrelevant in light of the unilateral actions being proposed by President Trump, said people familiar with the development.

Aside from China, which issued a strong statement against the threat posed by the US to the multilateral trading system, it is not clear what other members said at the GC meeting, said people familiar with the development.

Meanwhile, amidst the US threat of unilateral tariffs against countries that are considering alternative payment systems to the global US dollar-payment system, the Brazilian President Luiz Inacio Lula da Silva has responded forcefully, suggesting that the BRICS (Brazil, Russia, India, China, and South Africa) remains committed to ending US dollar dominance in trade “no matter what”, according to a report in Live Mint on 27 February.

President Lula is understood to have said that “US President Donald Trump’s threats to [impose] tariffs won’t stop the group’s determination to seek alternative platforms for payments between member countries,” according to the report in Live Mint.