The US imposition of tariffs on its three largest trading partners — Canada, Mexico and China — has already seen these countries decide to take similar steps against the world’s biggest economy. China has also decided to take up the issue with the World Trade Organisation (WTO).

According to International Monetary Fund (IMF) data, China is the biggest exporter of goods worldwide, followed by the US. In terms of imports, the US is No. 1, followed by China.  

But even as apprehensions arise on which country would become the next victim of US tariffs, following the 47th US President's assiduous pursuit of his ‘Make America Great Again (MAGA)' agenda, with tariffs emerging as an essential component of the strategy, the question that arises is: What will the WTO do to retain the sanctity of the multilateral trading system.

The reason for bringing this up stems from the concern about whether in its present form, the body has what it takes to call a spade a spade, and more significantly, prove effective when powerful countries (not just the US) appear to do what they please, regarding tariff impositions prompted by hypernationalism or as a tit-for-tat measure.

Tariffs, after all, are a low-hanging fruit, and countries find it easier to employ these as a policy measure.

Any seeming reticence of the WTO to show the mirror to economically strong nations — that stretchs the limits of their trade defence mechanisms to a point where it raises apprehensions of such steps going against the spirit of free and fair trade — could only increase the likelihood of trade barriers being raised arbitrarily by others.

This, by extension, could further increase the challenge to preserving the benefits of multilateralism.

WTO Goal: People's Welfare

Such hesitation by the global trade body could prevent the WTO from meeting its “fundamental goal”, which is to “improve the welfare of people around the world”.

Stability and predictability in trade policies are essential prerequisites for ensuring that consumers can gain from more choices and lower prices, which is ensured by increased competition, a point that was reemphasised in the G20 Rio de Janeiro Leaders’ Declaration, which stated that “ensuring a level playing field and fair competition consistent with WTO rules is essential to ensuring prosperity and fostering a favorable trade and investment environment for all”.

Sight must not be lost of the fact that Trump has also flagged the high tariffs prevalent in India, which enjoys a positive trade balance with the US. Although higher US tariffs have not been imposed on India so far, there is no guarantee that such a measure would not be taken against the world’s most populous nation.

As per the India Brand Equity Foundation (IBEF), bilateral trade between India and the United States stood at US$ 118.2 billion in FY23-24, with India having a trade surplus of US$ 36.8 billion. Of the total trade in FY24, Indian exports to the US stood at US$ 77.5 billion, while American exports to India were valued at US$ 40.7 billion.

In this context, it may be relevant to mention that while speaking at an event organised as part of the annual meeting of the World Economic Forum (WEF) in Davos last month, WTO Director-General Ngozi Okonjo-Iweala had warned of the adverse impact on the global economy by countries using tariffs to score a point.

“If we have tit-for-tat retaliation and we go to where we were in the 1930s, we are going to see double-digit global GDP losses. That's catastrophic. Everyone will pay, and the poor countries will pay even more,” the WTO chief had remarked.

Troubling Times For Global Trade

Earlier, in her message for the 2024 WTO Annual Report, Okonjo-Iweala had echoed a similar sentiment, saying: “These are troubling times for global trade. Amid geopolitical tensions and the backdrop of the climate crisis, we see increased protectionism and unilateral policy measures. Data suggest that after years of talk of decoupling, trade may be starting to fragment along geopolitical lines.”

In the final analysis, if ever the world needed the WTO to step up and prove its worth, that moment is now. A fragmented world where some geopolitical blocs compete for dominance can never spell good news for anyone in the long run, even if in the short run, it can provide certain countries with bragging rights.

Thus, the expectation would be that the global trade body would strive to the hilt to succeed in getting major countries to avoid the temptation of imposing tariffs, just because they feel they can do so.

For, as Paraguay President Santiago Peña Palacios said recently: “The creation of an international organisation that seeks to put order into chaos in the world of commerce, was not only a sound decision, but a brilliant and endurable insight… The WTO has been, is, and will be, a great idea.”

(The writer is a current affairs commentator. Views are personal)