Earlier US stocks snapped a winning streak when the news came that President Donald Trump may move ahead with proposed tariffs on an additional $200 billion in Chinese goods. The second salvo comes right back. Now he has categorically threatened that if the World Trade Organization doesn’t shape up, he would pull the United States out. Trump has gone too far declaring the agreement establishing the body was the single worst trade deal ever made. The WTO was created in 1994 as part of a U.S.-led effort by major economies to create a forum for resolving trade disputes. Since World War II, successive U.S. presidents have led efforts to establish and strengthen global trading rules, arguing that they would bring stability to the world economy. Trump is hell bent to undone that.

Trump said that the U.S. is at a big disadvantage from being treated very badly by the WTO for many years. The Trump administration has taken his complaints a step further by arguing that the WTO’s dispute settlement system is broken and in need of a major overhaul. U.S. Trade Representative Robert Lighthizer has accused the system of interfering with U.S. sovereignty, particularly on anti-dumping cases. The EU and Japan have been leading an effort to propose reforms to try and defuse the conflict.

The U.S. has been blocking the appointment of judges to the WTO’s appeals body, raising the possibility that it could cease to function in the coming years. A U.S. withdrawal from the WTO potentially would be far more significant for the global economy than even Trump’s growing trade war with China, undermining the post-World War II system that the U.S. helped build.

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IE&M Team
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