US tariff policy impacts the global multilateral trading system

Editor's note: The article, written by Xue Tianhang, an associate researcher at the Research Center for Regional Coordinated Development at Zhejiang University, reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity. 

The Trump administration announced the implementation of a "reciprocal tariffs" policy on April 2, which has severely disrupted the international economic order and raised global concerns.

US "reciprocal tariffs" run counter to the fundamental rules of the global multilateral trading system. First and foremost, such tariffs violate the most-favored-nation treatment enshrined in the WTO and other multilateral frameworks. The WTO prohibits member states from discriminating among their trading partners. Yet, "reciprocal tariffs" plan imposes differentiated tariffs on different countries based on the scale of the US's trade deficits with them. This practice severely undermines the cornerstone of the international multilateral trading system. 

Second, this policy distorts the principle of reciprocity in international trade. Within the WTO framework, reciprocity entails the mutual granting of trade concessions rather than a mechanical matching of tariff rates or trade volumes. The US is in fact pursuing trade balances under the guise of reciprocity, effectively turning tariffs into an instrument and a weapon. 

Third, "reciprocal tariffs" infringe upon the ability of developing countries to participate in global value chains, leaving their domestic industries vulnerable to international competitive pressures. This amounts to the unilateral bullying of developing countries. A former state minister of Ethiopia noted that the high tariffs imposed by the US will have profound consequences for African exports, resulting in job losses in key industries and a slowdown in economic growth across the African continent.

The rationale behind the US's introduction of "reciprocal tariffs" is equally untenable. To begin with, the US's trade deficit stems largely from its domestic economic structure. In the past, the US relocated low-end segments of the value chain, which are characterized by high pollution and labor intensity, to other countries while retaining high-value-added segments at home. Meanwhile, the pattern of high consumption and low savings of US residents necessitates imports of large amounts of primary goods from other countries. These factors have collectively contributed to a massive trade deficit for the US. In essence, this trade deficit reflects the US exploitation of other countries. 

Moreover, the "reciprocal tariffs" approach selectively ignores the US's surpluses in other areas. On the capital account, the US enjoys substantial inflows of global capital driven by its economic prosperity and the dollar hegemony, allowing for a capital account surplus even while running a current account deficit. In services trade, the US maintains a long-standing surplus of over $100 billion annually, which is attributable to its technological and competitive advantages.

As such, US "reciprocal tariffs" policy is unlikely to fix its trade deficit; instead, it may drag the US economy into recession. In the consumer field, living costs for average US residents are skyrocketing. According to the Budget Lab at Yale, following a series of tariff measures, the overall US inflation will rise by more than two percentage points in 2025. Prices for daily necessities will surge, with items like leather products and coats increasing by over 15 percent. This will push every US household to spend an additional $3,800. 

On the production side, steep tariffs on imported components for products like smartphones and automobiles are forcing US manufacturers to bear extra costs, which will weaken their global competitiveness. Notably, since the introduction of "reciprocal tariffs", US financial markets have experienced dramatic turbulence, with the stock market plunging.

History has repeatedly shown that unilateral bullying measures that override international norms are destined to fail. By imposing "reciprocal tariffs", the US has not only damaged its international reputation but also eroded public trust in its government, ultimately undermining the foundations of dollar hegemony. China, meanwhile, continues to work alongside the vast majority of countries to uphold multilateralism and promote the recovery and development of the global economy.

(Cover via VCG)