The WTO, as the guardian of rules-based global trade, is actually at its finest hour. US President Donald Trump is repeatedly attacking this order with his tariffs. The most serious example is China, where the US's so-called reciprocal tariffs are currently at an extremely high 145%. Beijing did not put up with this. Far less media attention was paid to China's WTO complaints than China's 125% counter-tariffs.

The first complaint was already made in February, when the USA imposed a 10% tariff on Chinese imports. Trump justified this with the protection of national security, which was jeopardised by the Chinese production and export of the drug fentanyl. Beijing denies this and considers the US government's measures to be violations of WTO rules – and even more the subsequent reciprocal tariffs. The second complaint before the WTO arbitration tribunal followed in April.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank (HCOB) and global trade expert, believes China is right. „I have no real doubt that the US tariffs violate WTO rules,“ he says. For example, the tariffs are not compatible with the Most Favoured Nation principle, one of the most important rules of the WTO. It stipulates that individual countries may not be discriminated against with tariffs. Exceptions are permitted if trade agreements exist. Furthermore, if agreed tariff rates are raised, the WTO must authorise this. A procedure that Trump ignores.

Despite the violations, the USA does not have much to fear. If the WTO arbitration tribunal finds a breach of the rules, counter tariffs are permitted to the extent of the economic damage caused. However, China has already pre-empted this by taking retaliatory measures. Or the USA would have to lift the tariffs again. However, the United States could appeal against such a decision, in which case the proceedings would no longer continue.

The WTO Court of Appeal has long been unable to act. The USA has been blocking the appointment of new judges since 2019, which is why the panel is not sufficiently staffed. The reason for this is once again China. The United States accuses the WTO of not taking sufficient action against Beijing's subsidies and dumping prices.

„The WTO rules need to be reformed in a number of areas. In addition to the arbitration tribunal, for example, the point that decisions must be made unanimously, which is much more difficult with around 180 members than in the EU with its 27 members,“ says de la Rubia. The WTO itself also sees an urgent need for reform, but is making little progress due to the differing views of its members.

Despite the problems, Melanie Hoffmann, customs expert at Germany Trade & Invest (GTAI), the promotion agency for Germany as a location, believes that the WTO is still very relevant for global trade. „The structure of the WTO rules is relatively outdated, but that doesn't mean that everything is bad,“ says Hoffmann. „The WTO is still important and functional.“

According to the WTO, around three quarters of global trade in goods still takes place according to its rules. Before the tariff conflict, however, it was 80% and the proportion could fall further.

The crisis in global trade caused by Trump could, however, also strengthen the role of the WTO in the long term. „There is a chance that the WTO will become more important again in the medium term as a result of the tariff conflict,“ says de la Rubia. „Getting China to agree to a tightening of the rules against anti-dumping measures and subsidies is a difficult task. However, if there is a global recession due to US tariffs, China's willingness to engage in dialogue could increase. Crises can always be a catalyst for reform.“

WTO General Director Ngozi Okonjo-Iweala takes a similar view. „In the face of this crisis, WTO members have a unique opportunity to energise the organisation, create a level playing field, streamline decision-making and adapt our agreements to better reflect today's global realities,“ she said in mid-April at the presentation of the organisation's World Trade Outlook. Many rules date back to the immediate post-war period.

Another important question is how the relationship between the USA and the WTO will develop. Unlike the World Health Organisation (WHO), for example, Trump has not yet announced a withdrawal. However, the USA has stopped paying its contributions for the time being and is examining whether it wishes to remain a member. „It would probably be better for the WTO under this US administration if the US left. Better a WTO without than with the United States, which may want to destroy the organisations from within,“ says de la Rubia.

However, he does not believe that the USA will take this step. Eric Robertsen, chief economist at Standard Chartered, takes a similar view of the situation. „There are people in the Trump administration, such as Treasury Secretary Scott Bessent, who know how important these multilateral organisations are for the US.“

The USA is actually the largest contributor to the WTO. Around 11% of the budget comes from the United States. This money is now disappearing for the time being. But as the organisation does not grant loans or provide aid money, it will probably be able to better cope with the lack of income than the World Bank would, for example, if the USA were to leave. Nevertheless, the situation is not leaving the WTO unscathed. With reference to insiders, Reuters reports that staff costs are to be reduced.

As long as the WTO is working on its reforms, the international community will not remain inactive. In response to the blocked arbitration tribunal, a new one has been established. It was set up by 47 WTO members in 2020, but cannot impose judgements on non-members such as the USA. „The newly installed arbitration tribunal MPIA is a smart way to resolve disputes in global trade,“ de la Rubia concludes.

Trade agreements are also becoming more important due to the problems of the WTO. „We are seeing a trend towards bilateral agreements, as these are easier to reach than agreements between all WTO members,“ says Hoffmann. This development could also gain momentum as a result of the tariff conflict. The EU wants to conclude a free trade agreement with India this year. Should this actually materialise, it would be „the largest of its kind in the world“ according to EU Commission President Ursula von der Leyen.