Trump's Trade Policies Spark Global Uncertainty, 50% Tariff on Brazil Latest Example

Trade expert Kristen Hopewell from the University of British Columbia has warned that the Trump administration's approach to international trade has effectively rendered U.S. trade deals unreliable. By dismantling the mechanism that settles international trade disputes, countries negotiating with the Trump administration have no way to enforce any bilateral trade agreements. This lack of enforcement creates little incentive for the U.S. to adhere to the terms of any deal, as the administration could simply change the terms at a later date.

Hopewell argues that the best solution would be to expel the U.S. from the World Trade Organization (WTO) and re-establish the WTO’s Appellate Body, which acts as the supreme court for global trade. The Appellate Body was effectively paralyzed when the Trump administration blocked all appointments to it, leaving no quorum to adjudicate trade disputes. This has resulted in a situation where countries have little incentive to abide by the rules, as they can break them with near impunity.

President Trump's recent threat to impose punishing tariffs on Brazil serves as an example of this erratic approach to international trade. The 50% levy on goods was in retaliation for a perceived political witch hunt against his ally, Jair Bolsanaro. This administration is bringing back the law of the jungle to international trade, according to Hopewell, and time is running out to salvage the remains of a post-war system of commerce that promoted stability and prosperity across the world.

Hopewell's concerns were further highlighted when news emerged that Vietnam had been caught off guard by Trump's premature announcement of a 20% duty on all goods entering the U.S. from the southeast Asian country. Vietnamese officials were reportedly still hoping for a number closer to half that. This incident underscores the unpredictable nature of Trump's tariff policies, which appear to be based on a formula of "common sense" that reflects "how we’ve been treated," according to the president himself.

Hopewell argues that this erratic and fickle approach to international negotiations is symptomatic of a Trump deal. She warns that the administration can simply come back later demanding more, with no guarantee that any deal will actually be upheld. This is because the president already removed a cornerstone underpinning global commerce during his first administration when he blocked all appointments to the WTO’s Appellate Body.

The WTO is unique amongst international organizations in that its rules are actually legally binding on states. It had teeth, or rather it had teeth. Since the Biden administration continued its policy of blocking appointments to fill its vacancies, there is now no quorum to adjudicate trade disputes, leaving countries little incentive to abide by the rules anymore. Quite the contrary, they can break them with near impunity.

Hopewell believes the moment for bold action has arrived. She argues that the international community should consider expelling the United States from the World Trade Organization in order to revive its paralyzed Appellate Body. She warns that the stakes are really high, so it’s worth considering more radical solutions. Trump has long sought to undermine the WTO in favor of bilateral deals, where the U.S. holds more leverage. By agreeing to bilateral talks, foreign governments hoping to protect domestic industries are undermining themselves. They’re playing right into Trump’s hands.

To many Americans, Trump’s aggressive trade stance may appear cost-free. But the fallout has yet to reach consumers, in part because industries like autos stockpiled inventory ahead of new duties. It will take some time before the effects of the tariffs are felt in higher prices, but when that hits, it’s going to be a profound economic shock for the U.S., according to Hopewell.