Trump may de facto leave the WTO

Axios reports:

Axios has obtained a leaked draft of a Trump administration bill — ordered by the president himself — that would declare America’s abandonment of fundamental World Trade Organization rules. 

The draft legislation is stunning. The bill essentially provides Trump a license to raise U.S. tariffs at will, without congressional consent and international rules be damned.

The bill, titled the “United States Fair and Reciprocal Tariff Act,” would give Trump unilateral power to ignore the two most basic principles of the and negotiate one-on-one with any country:

  1. The “Most Favored Nation” (MFN) principle that countries can’t set different tariff rates for different countries outside of agreements;
  2. “Bound tariff rates” — the tariff ceilings that each WTO country has already agreed to in previous negotiations.

“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” said a source familiar with the bill.

The FART Act would be well named.

A rules based approach to trade has been one of the greatest global successes of the post WWII economy. Trump pulling out of the WTO would be hugely damaging.

Luckily there is no real chance Congress would pass such an Act. However Trump may ignore Congress and just use more fake national security grounds to impose tariffs at will.

It i no surprise that the tariffs are backfiring. Harley Davidson has already said they will have to move manufacturing from the US to overseas because of the retaliatory tariffs from the EU.

Trump’s tariffs may cause more US companies to become unprofitable. That is because he is imposing tariffs more on raw materials than consumer goods. The reason for that is hoping US consumers don’t notice an increase in stuff they buy.

But by imposing it on raw materials, it increases costs for US manufacturers. And hence, makes it more likely they will move manufacturing to a country where there is no tariff.

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