What Might a Trump Withdrawal from the World Trade Organization Mean for US Tariffs?



Chad P. Bown and Douglas A. Irwin | The Peterson Institute for International Economics

President Donald Trump has long made clear his disdain for the World Trade Organization (WTO). In October 2017, he stated: “The WTO, World Trade Organization, was set up for the benefit of everybody but us. They have taken advantage of this country like you wouldn’t believe.” In March 2018, in announcing plans for tariffs on imported steel and aluminum, he stated: “The WTO has been a disaster for this country. It has been great for China and terrible for the United States.”

In June 2018, Axios reported that President Trump had repeatedly stated his desire to pull the United States out of the WTO. Advisers to the president tamped down the report, as did the president, who later said, “I’m not talking about pulling out [of the WTO].” But, he added, “We’ve been treated very badly. . . . It’s an unfair situation.”

Despite his denial, the president essentially confirmed his thinking in an interview with Bloomberg on August 30, 2018. “If they don’t shape up, I would withdraw from the WTO,” he said, arguing that the agreement establishing the body “was the single worst trade deal ever made.”

Although there are no indications of specific plans to take such a step, Axios reported in early July that, on the orders of the president, the administration had drafted a bill—entitled the United States Fair and Reciprocal Tariff Act—that would do away with the most-favored nation (MFN) clause, which requires the United States to treat all WTO members equally in terms of the import duties applied to their goods.

Such a step would allow the president to increase tariff rates, even rates “bound” (fixed) in previous trade negotiating rounds. Given that the president withdrew the United States from the Trans-Pacific Partnership (TPP) and repeatedly threatened to withdraw from the North American Free Trade Agreement (NAFTA), merely floating the idea that the United States would pull out of the WTO has set off alarm bells in Washington and around the world.

Before Trump became president, a US withdrawal from the WTO had never been considered within the realm of possibility. It now raises several important questions.

This Policy Brief addresses two of them. First, what would be the consequences for US tariffs if the United States withdrew from the WTO? Second, does the president have the legal authority to pull the United States out of the organization and impose higher tariffs without congressional approval?




To view the full report, click here.