What might a second Trump administration mean for the WTO?

A few weeks ago we published a piece reflecting on the future of the World Trade Organization (WTO). We argued that four developments currently underway might offer a pathway to securing its future. Then the US election happened, and all bets appeared off.

Pre-election promises by Donald Trump to impose tariffs of 60% on Chinese imports and 20% on imports from other countries have stoked concerns about a new protectionist era and costly trade wars. The future of the WTO once again is being said to be in the balance.

We aren’t so sure. We certainly don’t think that Trump’s re-election will be a boon for the WTO, and whatever the next four years have in store for the organisation it will be challenging. But suggesting that the threat to the WTO is existential is probably a little off the mark.

Why? Several considerations give us reason to be sceptical of the most dire predictions.

While the vehemence of Trump’s rhetoric on trade and his willingness to countenance a withdrawal from the WTO are exceptional, the US has not been meaningfully engaged in the multilateral trading system for the best part of 20 years. Yet, the organisation continues to have value and is sustained by the energy of other members as well as by the Secretariat.

Even if the US did disengage completely, it might not be fatal. The WTO wouldn’t be the first institution from which the US has withdrawn. History suggests that well established international organisations have tended to survive bouts of US exceptionalism. The International Labour Organization (ILO) weathered the US’s departure in 1977. The United Nations Educational, Scientific and Cultural Organization (UNESCO) persevered when the US pulled out in 1984. And the International Monetary Fund (IMF) survived President Nixon torpedoing the Dollar Standard in 1971. Such moments are undoubtedly crisis points, but they tend not to be terminal in the way commentators expect at the time.

Moreover, a US withdrawal would not remove the relevance of the WTO for other members. The rest of the world is still signing trade deals. In the first half of 2024, the WTO Secretariat reported ten new RTAs, with eleven further deals awaiting consideration. In 2023, the Investment Facilitation for Development Agreement was successfully concluded with the number of current signatories standing at 126. The point is that US hostility is simply not reflected elsewhere.

Undoubtedly, greater US protectionism will be a headache. But it will also bring with it new third party trade opportunities. The WTO will have a role in facilitating the negotiations and identifying the openings that emerge. While it is the case that the welfare gains from any resulting trade deals will be limited by the absence of the US, outcomes of the magnitude once envisaged by the system’s architects have been off the table since WTO members gave up hope of negotiating single undertakings.

It is also worth bearing in mind that we have had 80 years of progressively freer trade. Adverse reactions are always going to happen. The art is navigating the inevitable oscillations. While one might disapprove of measures taken by the Trump administration and recognise that they may prove ineffectual or be self-limiting in the long run, there are real structural and political problems within the United States that any administration must address.

Turning to China, while Trump’s antagonism may be somewhat overbaked, there are valid criticisms to be made of Beijing’s commercial policies and its recent attempts to solve the PRC’s domestic economic travails through a renewed export drive. Pressure from economists and trade partners has not encouraged a rebalancing of China’s economy toward domestic consumption. At over 44% in 2024, China’s savings rate is exceptional, and is driving monetary imbalances that result in trade imbalances. With limited opportunities for the diversion of China’s current US-bound exports toward other markets, Beijing may face no choice other than to stimulate greater domestic demand. This could go a long way toward easing global commercial tensions and be of broad benefit even if the means by which it is achieved raises eyebrows.

China-US trade aside, the WTO and sympathetic member states have a history of responding to existential threats in ways that shore up the institution. This will continue. Certainly, workarounds will take up the time and the negotiating resources of WTO members for the next four years, but the likely future of the organisation will be different anyway.

Regardless of the outcome of the 2024 US Presidential election, the grand commercial ambitions that accompanied the WTO’s founding have not been realised, nor are they now ever likely to be – though smaller multilateral outcomes may be forthcoming. The diminution of the negotiating function has seen other elements of the WTO grow and has put the organisation on sturdier foundations. Dispute settlement, though hamstrung by the absence of an appellate function, continues to mediate between conflicting parties. The WTO has developed a training, advisory, and data gathering function that was previously absent. And greater movement into development and trade-related social issues has increased buy-in from developing countries, which make up the lion’s share of the organisation’s membership.

So, while it might be the case that the future of the WTO is uncertain, there are plenty of reasons to suppose that the challenge of a second Trump administration won’t be existential. Success will be ensured through the artful realisation of the opportunities that inevitably arise in changed circumstances and not by languishing amid anxiety about what will or might be. There are choices to be made here but the future is perhaps not as gloomy as some might otherwise suppose.