Opinion
Indira Rajaraman: US Liberation Day tariffs target the WTO’s playing field
Summary
- Import levies announced on 2 April by the US have effectively declared war on global trade protocols as part of President Donald Trump’s dramatic reset. He is overturning the core principles of cross-border commerce.
The United States Trade Representative (USTR) is a cabinet-rank official whose office is embedded in the Executive Office of the President of the US. The USTR on its website is described as “the president’s principal trade advisor, negotiator, and spokesperson on trade issues." Created by a legislative act in 1962, the USTR has historically proclaimed its alignment with the World Trade Organization (WTO) as a leveller of the global trade playing field.
In the years before and after the Indian reforms of 1991, the then USTR Carla Hills was a frequent visitor to the ministry of commerce in Udyog Bhavan, with a sheaf of documented Indian violations of WTO rules. The mosquitoes in Udyog Bhavan must not have improved her mood. India was consistently on the USTR watch list. In the most recent 2025 USTR report released on 31 March, India is criticized for tariff and non-tariff impediments to US exports (not updated to tariffs negotiated with a USTR delegation in March 2025).
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Against that backdrop, let us look at the 2025 tariff initiatives by the US, before and after its big bang on 2 April. They fall into five categories in terms of disruption of the pre-existing WTO playing field.
The first category was of country-targeted tariffs at 25% on (most) imports from two countries—Mexico and Canada—bound to the US by a free trade regional treaty of the kind permitted as a carve-out by the WTO. These tariffs do violate the United States Mexico Canada Agreement (USMCA) of the first Donald Trump administration. But the USMCA falls outside the purview of the WTO. The stated reason for these tariffs was that drugs, principally fentanyl, and illegal migrants were crossing the borders. It is unfortunate that the United Nations Office on Drugs and Crime (UNODC) headquartered in Vienna is ineffectual. The tariff initiative has degenerated into reciprocal tariffs levied by Mexico and Canada. So, whether the US will achieve its original objective is unclear.
The second category is of tariffs targeting other named countries, protected in principle by WTO rules. China was the only country in this category before 2 April. The across-the-board tariff on imports from China, initially at 10% and ramped up later to 20% (before the big bang), violates the Most Favoured Nation (MFN) principle of the WTO, a quaintly phrased way by which equality of treatment is guaranteed to all trading partners.
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The third category, unilateral sector-targeted (UST) tariffs on steel and aluminium, and most recently, automobiles and automobile parts, target no specific country, and therefore do not violate MFN provisions, unless there will be country exemptions, for say the UK. However, these tariffs violate the bound tariff commitments required by the WTO of all member countries.
A fourth category of bilaterally levelized rates (BLR) by country was released on 2 April. Country targeted bilateral levelling is a comprehensive war on MFN, which protected trade from bilateral political tensions and reduced costs of processing imports at the entry point. Successive WTO/GATT rounds only worked towards reciprocal reductions in tariffs without reference to tariff levels.
The import processing advantage of MFN is so compelling that the 2 April tariff announcement, nominally targeting bilateral levelling, actually levies a uniform basic 10% tariff on all imports into the US, except for 60 countries or trading blocs. (The countries in that 10% group might actually be charging less than 10%, which violates the levelization principle). The 10% replaces and does not stack up on pre-existing levies.
Starting 9 April, higher tariffs will be levied on China (34% on top of the earlier 20%) and the EU (20%). Canada and Mexico remain where they were. The new tariffs do not add on to sectoral tariffs on steel, aluminium and cars. In addition, 11 countries are singled out for the highest tariffs, making for 15 countries in all, targeted for having the largest trade surpluses with the US. India is unfortunately among the 11, despite the recent tariff negotiations.
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The basis on which the country-specific rates are to be set for these 11 countries has not been officially made public. A New York Times calculation shows how the additional 34% tariff on China may have been arrived at. The total bilateral trade deficit with China of $291.9 billion as a percentage of total imports from China of $433.8 billion equals 67%. That figure halved yields 34%.
The only justification I see is punishment for the US bilateral trade deficit loaded on to imports by value, reprieved by that division by two.
The average tariff rate levied by India is quantified at 17% in the USTR fact sheet accompanying the announcement, although the “discounted tariff" using the same formula as for China works out to 26%. If that formula is used, it imposes a higher rate than the average rate levied by India.
Finally, there is a fifth category in which US tariff moves fall, and that is bilateral retaliation targeting (BRT).
When the EU responded to American steel tariffs by raising levies on Bourbon whisky from the US, the retaliatory US threat was a 200% tariff on EU wines.
In this last instance alone, the actions on both sides may well work towards the good health of all concerned.
The author is an economist.
