After the Trade War

Foreign Affairs  |  Michael B. G. Froman

The World Trade Organization has effectively ceased to function as Washington threatens or imposes tariffs ranging from 10 to more than 50 percent on dozens of nations. This systematic dismantling of global trade institutions marks the abrupt collapse of foundational rules, including the most favored nation principle that long mandated equitable treatment among member states.

The systemic erosion reflects a structural shift driven by unilateral economic strategies, notably the American "America first" agenda alongside Chinese policies such as "dual circulation" and Made in China 2025. By disregarding the World Trade Organization's dispute settlement mechanisms and negotiating forums, major economic powers are actively supplanting rules-based international governance with coercive bilateral pressure. Consequently, cross-border commercial relationships are rapidly fragmenting, accelerating a broader transition away from binding multilateral commitments toward arbitrary tariff structures, managed trade agreements, and persistent supply chain vulnerabilities across key global markets.

Comment

The breakdown of Article I Most-Favoured-Nation obligations within the World Trade Organization removes the primary legal barrier against discriminatory tariff structures. Subsidies integrated into industrial initiatives like Made in China 2025 exploit this procedural paralysis by shielding sovereign supply chains from trade litigation. Without a functioning Appellate Body to adjudicate non-tariff disputes, international economic governance devolves into raw power projection. Sovereign entities are left without institutional mechanisms to challenge mercantilist import controls or retaliatory duties.

Strategic Question for Discussion

If the World Trade Organization remains unable to enforce Article I Most-Favoured-Nation rules, which factor will exert greater influence on middle-power trade strategies — the threat of unilateral tariff exclusion or the pull of state-subsidised industrial programs like Made in China 2025?

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