Opinion | Reciprocal tariffs are nothing short of an attack on world trade

The WTO’s most-favoured nation principle requires that its members treat others equally. WTO members are not supposed to discriminate between their trading partners. So when a WTO member lowers or raises a product’s import duty for any member, it must do the same for all other members. Other than some exceptions, such as arrangements for free trade blocs, a WTO member should apply the same tariff rate for all members for the same product despite facing different rates from other members for its own goods.

Given the different tariff rates WTO members apply, Trump’s reciprocal tariff policy will inevitably result in various rates for different members. Consequently, some members will be discriminated against by paying a higher duty than others when exporting to the US.

WTO members set “bound rates” for imports, which are ceilings on their customs tariff rates. These rates were negotiated and agreed with all other WTO members. They are therefore legal commitments to the organisation as well as other members. Under WTO rules, no member is permitted to raise its bound rates unilaterally. Increasing rates requires negotiations and agreement among members.

If enacted, Trump’s tariffs would push the US’ actual rates beyond its bound rates. The US has an average bound rate of 3.4 per cent.