Disclaimer: The views and opinions expressed in this article are those of the author(s) and do not represent the views or policy positions of the Washington International Trade Association or Foundation, or the Board of Directors or staff of either entity.
It is not the 1930s Great Depression or at least not yet again; the manufacturing sector (output has increased, yet activity has declined) has taken a stride forward since then, but currently it will likely be affected given the influence of tariffs on goods and services. Inflation is another factor to be considered when implementing tariffs and trade policy today even if it has evolved over the years to the point that it has been at least 100 years now since we are in a trade war given President Trump’s tariffs as of recent impacting “global trade,” and the overall financial system. (FDR’s “Good Neighbor Policy with regards to relations with Latin America, comes to mind now and I wondered if this is the right time to implement changes in global trade as it may affect relations with all our neighbors). Despite all, the current US trade deficit is $147.9 billion, a decrease from $155.6 billion as of this past February 2025. A negative balance of trade is never a good thing and increased unemployment would lead to other unpleasant problems.
It may not be the right time to effect global trade given the market dynamics already globally despite a strong US economy and why disturb the balance of power all over the world, but this would mean the trade deficit may not decrease or may – it’s a difficult predicament indeed. There will inevitably be an impact, changes to trade policy, and trading partner relations, the financial markets in the US have already seen an effect across asset classes, and other countries are affected as well. So, are we to go bananas over this and the changes in the balance of power vis a vi trade relations that may come to be? Tariffs and the WTO are not new in trade policy, and among trading partners this is commonplace, but trade wars are of concern as they impact everything and all aspects of economies. Tariffs are used for many reasons and the WTO has been the governing international organization for any trade-oriented disputes thus far.
Tariffs: Tariffs are implemented by Administrations for varying reasons, such as national security, raising revenues, and to boost certain goods in the market through taxation. It is all meant well policy as US governments are not corrupt typically, but the outcome is not always so pleasant, depending on what side you are on amongst developed and developing countries. The primary goal is to help one’s own country’s economic growth and competitiveness, fostering trade agreements, and protecting domestic industries and workers from unfair practices, and in a rules-based trading system thus far.
GATS & Trade: The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) which entered into force in January 1995 as a result of the Uruguay Round negotiations whereby the WTO was created. It aimed to promote fair and transparent rules for international trade in services. Today The United States is still a member of the WTO and one would hope the USTR negotiations with other member countries (166 under the WTO) is ongoing and conducted effectively.
The last time I checked (which was last week) “punishing 10% universal tariffs remain in place, as do 25% tariffs on autos, 25% tariffs on some goods from Mexico and Canada, and 25% tariffs on steel and aluminum, and with China specifically they are at 145%”, which all indicates more-so to a recessionary environment than not. What came to mind most importantly was the “Banana Trade Wars and the EU” episode I learned of some years ago, with regards to certain Latin American countries when the EU was imposing high tariffs on them; this began in 1993 and went on for at least 20 years. As way of discourse the backdrop and some lessons from the “Banana Trade War & the EU were as follows:
The “Banana Trade Wars & the EU”:
The “banana trade wars” was a long-standing dispute between the EU and the US (and other Latin American countries) over banana import tariffs, primarily stemming from the EU’s preferential treatment of banana exporters in African, Caribbean, and Pacific (ACP) countries. This dispute lasted at least 20 years and resolution was sought through the WTO. The EU agreed to replace its preferential import regime with a tariff-only system, where banana import tariffs would be reduced annually to €114 per tonne. In return, Latin American countries agreed to drop their complaints against the EU at the WTO and not to seek further tariff cuts in the Doha round talks.
The WTO Dispute: The dispute stemmed from the EU’s banana import regime favoring suppliers from its former colonies in the Caribbean and Africa while imposing tariffs on bananas from Latin American countries, particularly those grown by U.S. companies. This system discriminated against bananas from Latin America, which were the primary source of bananas for US multinational companies like Chiquita. The United States challenged the EU’s actions at the WTO, winning favorable rulings that forced the EU to change its rules. After years of negotiations and WTO rulings, the EU and Latin American countries reached a trade truce in 2012. The United States, along with other Latin American countries (the main countries were Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru, and Venezuela) filed a complaint with the World Trade Organization (WTO) against the EU’s banana import regime, arguing that it violated WTO rules, particularly those related to non-discrimination and most-favored nation treatment.
From the EU’s perspective they believed they were imposing tariffs on bananas on Latin America mainly due to protecting banana growers in its former colonies in Africa, the Caribbean, and the Pacific, and thus fulfilling its obligations to these former colonies. However, in this case controlling the supply of bananas and favoring certain countries was harmful for the Latin American countries leading to dire consequences. The US involvement was also largely due to many of the US based companies in Latin America being affected.
WTO Ruling: In 1997, the WTO sided with the US, ruling that the EU’s banana import regime was inconsistent with WTO rules and that the EU must change its preferential policy. The EU initially resisted the WTO ruling, making superficial adjustments to its banana regime (but not reducing tariffs drastically), which the US saw as a mockery of the WTO dispute settlement process. However, after years of negotiations, the EU eventually agreed to gradually reduce its tariffs on Latin American bananas.
Then came the 2009 Geneva Agreement: In December 2009, the EU, Latin American countries, and the US reached an agreement, known as the Geneva Banana Agreement, to gradually reduce the tariffs on Latin American bananas. This agreement saw the EU commit to reducing its import tariff on bananas from Latin America in eight stages, from €176 a tonne to €114 in 2017.
The End of the Dispute: This came with the Geneva agreement formally ended the long-standing dispute, with the EU and Latin American countries signing an agreement to formally end eight separate World Trade Organization (WTO) cases. The 10 countries support and the US involvement provided support and shared interests led to end of the dispute. Going at it unilaterally would have had other outcomes, although in settling this longest-running series of disputes in the history of the WTO’s multilateral trading system that would have never been an option.
If the EU’s tariffs on Latin American bananas had not ended, Latin American banana exporters would have faced increased costs and reduced market access in the EU, potentially leading to economic hardship for producers and increased prices for consumers. The tariffs, which favored banana producers from the Caribbean and Africa, would have continued to distort the global banana market and negatively impact Latin American banana-producing countries, and there would have been further trade tensions.
The key considerations are the self-interests of countries inevitably, but keeping in mind that a world order and fairness should coexist as all economies are connected in some shape or form and economic cooperation is one way to maintain this order. This was an instrumental consideration in the case of the “Banana Trade Wars & the EU”, and in resolving it.
Ms. Sonal Patney – Banker & Author