Expert: Tariffs violate WTO rules

The latest tariffs announced by the U.S. administration are unlikely to achieve stated goals, pose a significant risk to the global economy, and violate international trade commitments, according to U.S. trade experts.

"In the WTO (World Trade Organization), the U.S. agreed on a detailed schedule of ‘bound' — meaning upper limit — tariffs on virtually all merchandise imports. Trump's tariffs completely violate this basic commitment made to other countries through the WTO," Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics (PIIE), told China Daily.

U.S. President Donald Trump on Wednesday unveiled new tariffs, citing an "economic emergency". He introduced a 10 percent baseline tariff on goods imported from nearly all trading partners, excluding Canada and Mexico, and individualized tariffs targeting around 60 countries for what he called unfair trade practices.

Trump said the tariffs aim to address long-standing trade imbalances and boost domestic manufacturing.

Hufbauer criticized the administration's decision to impose broad new taxes on imports, saying that the underlying reasoning is flawed. He dismissed the stated objectives of reducing the U.S. trade deficit, protecting domestic industries and encouraging the reshoring of manufacturing.

"The reasoning is faulty," said Hufbauer. "Back in the 1970s, many countries tried ‘import substitution' policies to become manufacturing powers, Brazil, India, for example, and they all failed. High U.S. tariffs will not revive U.S. manufacturing."

Sourabh Gupta, a senior fellow at the Institute for China-American Studies, told China Daily: "Trump's claimed reasoning will not bear fruit. The cause of the trade deficit ranges much beyond the level of foreign tariffs and is intimately connected with domestic savings and consumption rates."

Hufbauer criticized the methodology for setting specific tariff rates, which target countries that have large trade surpluses with the U.S. with much higher penalties, including China.

"The method of calculation has nothing to do with tariff and nontariff barriers imposed by foreign countries on U.S. exports," said Hufbauer. "The rates above 10 percent are all driven by the U.S. bilateral merchandise trade deficit with the foreign partner."

Gupta also criticized that approach, saying, "It is a silly concoction to use the U.S.' bilateral trade deficit with a partner country as a proxy for supposed unfair practices" and that it "ignores basic Trade Policy 101 lessons".

Among the 60 or so countries targeted by additional tariffs, China faces a particularly high combined rate, though not the highest, potentially reaching 54 percent on many goods. Hufbauer predicted that would have severe consequences for the bilateral relationship.

"Trump's tariffs, plus Chinese retaliation, will sharply reduce bilateral U.S.-China trade. Both countries will lose," he said. "My guess is that two-way trade will be cut by 60 percent or more."

Gupta said that with the combined tariffs potentially reaching 54 percent on many Chinese goods, plus existing tariffs and the removal of exemptions, "China's exports to the U.S. will decline steeply.

"China's countermeasures mean that U.S. exports too will take a material hit," he said. "Both sides will suffer, with concentrated groups of Chinese exporters and a wide swath of American consumers bearing much of the brunt."

Hufbauer noted the significant risk of broader international retaliation and potential escalation. But he outlined a scenario where a full global trade war, like that of the 1930s, might be averted.

"Hopefully, other countries will confine their responses to retaliation against the U.S., and not against other countries in the world trading system," he said. "If other countries are sensible, there will not be a global trade war as occurred in the 1930s."

China has already announced plans to impose 34 percent tariffs on certain U.S. products in response to the new measures.

"This will be a global trade war that is not fought globally but is fought against just one country — the U.S. — by most other countries," Gupta said. He also said that while there is a window for negotiation, it is narrow due to the underlying motivation related to the trade deficit.

Hufbauer said that while the U.S. actions damage America's own role in the global economy, they don't necessarily signal the end of globalization itself, provided other major players respond strategically.

"Trump's tariffs will bring down U.S. participation in globalization, much to the disadvantage of the U.S.," he said. "But they need not bring an end to globalization if other major countries, like the EU, China and Japan, are sensible."

Gupta had a similar view. "The U.S. may be stepping out of the globalization dance. But for most other countries, such as China, Japan, South Korea, and economic areas, such as the EU and Mercosur, ties of interdependence and globalization continue to deepen in most contexts — despite the imperatives of national economic security," he said.