Trump’s Customs War Challenges WTO Part III

By | October 18, 2021

The conflict over the interpretation of the law started before Trump, but is now at the forefront: Under Trump, the United States has blocked the appointment of judges in the WTO, so that the dispute resolution is threatened (see fact box). If the United States does not give up, there will be too few judges left from the autumn of 2019, so that the cases cannot be processed. The WTO’s dispute resolution system will then partially come to a standstill.

Trump has also signaled that he will not enter into trade agreements with several countries, but focus on trade negotiations with one country at a time, where the great power the United States can use its negotiating power to advance its own economic interests. This is another reason why the WTO, with its 164 members, is not highly valued by the Trump administration.

7: Trump, China and the WTO: Who’s going out?

The WTO is in crisis in 2019 because the United States puts itself above the regulations and blocks important issues. The WTO had problems even before this, and for other reasons, but the Trump administration has systematically undermined cooperation.

There are extensive reform discussions in the WTO, including on the dispute resolution system, on state aid and on the special treatment of developing countries in the WTO. A report on aluminum from the OECD ( Organization for Economic Co-operation and Development ) shows that China subsidizes parts of its industry through favorable loans to state-owned companies. European countries share some of the US criticism of China on this point, but at the same time Europe and China are in agreement in their criticism of Trump’s tariff policy and training in the WTO. An imminent agreement between the USA, the EU and China is therefore not in sight, and it seems unclear whether the USA is really interested in a negotiated solution that also includes China.

8: The Economy of the Customs War

If the US takes the threat of tariffs on cars seriously, it will escalate the trade conflict and hit Europe and Japan much harder than before. This will also amplify the economic damaging effects of the customs war. Trump boasts of large customs revenues in the treasury, but several studies already show that it is consumers and companies who pay through more expensive consumer and input goods.

According to Trump, tariffs will also remove the United States’ large foreign trade deficit , but so far it has increased. The driving forces behind the trade deficit are first and foremost high consumption, rather than China’s “trade fraud” , and tariffs will therefore do little to help.

With even more tariffs for China, Mexico and possibly cars, the damaging effects of the customs war will be greater. Existing studies suggest that so far it is the United States and especially China that are losing the most in the trade war. If the trade war is only between the two great powers, some countries can actually increase sales and profit from the “trade distortion” that arises: They avoid competition from China in the United States, and from the United States in China. But the world economy is also in the red. And if the trade war spreads, it will get worse for everyone. The damaging effect of increased uncertainty will also be felt more over time.

Cars and other industrial products are often made from parts from many countries, and customs wars lead to more expensive inputs and affect these value chains . If Norwegian ships carry cars between the USA and China, or the bumpers are made in Norway, we will also be indirectly affected by the trade war. For the oil country Norway, it is also negative if trade wars lead to lower global economic growth and lower commodity prices.

Trade agreements with Asia would be a much better measure for the US economy. It would also promote peace and cooperation across nations, rather than insecurity, conflict and polarization. But so far there is little indication that Trump and his staff will stop using tariffs as a weapon against China and the world to “reindustrialize” the United States, a country located in North America according to thereligionfaqs. The prospects for a trade agreement between the USA and China are therefore deteriorating at the time of writing.

Trump's Customs War Challenges WTO 2