Tariffs were slapped on steel and aluminium from Canada, the EU, and even allies like Japan. The Trump administration called it a bid to protect national security, but to many, it felt like a trade war without borders. Then the focus narrowed. The rhetoric sharpened. China became the main target. Allegations of intellectual property theft, unfair subsidies, and a ballooning trade deficit turned Washington’s economic offensive into a strategic assault. Hundreds of billions in tariffs followed, and Beijing retaliated in kind. The US-China trade war has peaked now.
Amid this storm stood the World Trade Organisation—once a respected rules-based umpire of global commerce, now a sidelined institution watching its authority tested by the very powers that helped build it. Was this a test of the WTO’s resilience—or a glimpse of its decline in an era of economic brinkmanship?
Understanding the WTO’s Mandate
The WTO, established in 1995, is an intergovernmental organisation that regulates international trade. Its main goals include:
- Facilitating the smooth flow of global trade
- Settling trade disputes between countries
- Ensuring trade rules are transparent and predictable
- Acting as a forum for trade negotiations
With 164 member states (as of 2024), the WTO’s Dispute Settlement Body (DSB) is the backbone of its enforcement mechanism. When one country believes another is violating trade rules, it can file a formal complaint, initiating a legal process that can take months or even years to resolve.
The US-China Trade War: A Brief Context
The US-China trade war began in 2018 when the Trump administration imposed tariffs on Chinese imports, accusing Beijing of unfair trade practices, forced technology transfers, intellectual property theft, and a growing trade imbalance. China retaliated with its tariffs. This tit-for-tat quickly escalated, affecting hundreds of billions of dollars in goods.
The WTO was pulled into the fray almost immediately. Both nations brought multiple cases against each other, essentially using the WTO as a legal battleground for economic skirmishes.
WTO’s Involvement: Key Legal Actions
- China vs. United States (Tariffs on Steel and Aluminium)
In 2018, the US imposed tariffs on steel (25%) and aluminium (10%) imports from several countries, including China, citing national security concerns under Section 232 of the Trade Expansion Act. China challenged these tariffs at the WTO, arguing they were protectionist and in violation of WTO rules.
Outcome: In December 2022, the WTO ruled that US tariffs violated global trade rules. However, the US rejected the ruling, stating national security concerns were non-negotiable. - United States vs. China (Intellectual Property)
In 2018, the US filed a case at the WTO accusing China of discriminatory licensing practices that disadvantaged foreign companies.
Outcome: In 2019, the WTO sided with the US, confirming that China had indeed violated certain trade rules. - China vs. United States ($200 Billion Tariff Package)
China contested the US’s sweeping tariffs on $200 billion worth of Chinese goods under Section 301 of the Trade Act.
Outcome: In September 2020, the WTO ruled that the US violated trade rules with these unilateral tariffs. Washington refused to accept the decision, questioning the WTO’s competence.
The US Undermining the WTO?
While China has largely worked within the WTO framework, the US has adopted a more confrontational stance, particularly under the Trump administration. Washington has accused the WTO of bias towards developing nations, primarily China, and of being ineffective in dealing with subsidies and state-owned enterprises (SOEs).
Blocking of Appointments: One of the most consequential moves by the US was its decision to block appointments to the WTO’s Appellate Body—the final court of appeal in trade disputes. By December 2019, the Appellate Body had lost quorum, effectively paralysing the WTO’s ability to enforce rulings.
This has had significant implications. Countries can now appeal against WTO rulings “into the void,” stalling the legal process indefinitely. In a way, the WTO’s authority is only as strong as its members’ willingness to comply, and the US, the world’s largest economy, has shown increasing reluctance.
China’s Strategy: WTO as a Legal Shield
Unlike the US, China has not withdrawn from WTO mechanisms and has instead used them as a defensive and legitimising tool. Beijing portrays itself as a committed multilateralist, using WTO rules to challenge US actions while also countering narratives that depict it as a rogue trader.
However, critics argue that China’s embrace of the WTO is selective. Issues like industrial subsidies, opaque procurement policies, and SOE advantages are hard to regulate under current WTO rules, which were not designed with modern China’s economic model in mind.
Reform or Ruin?
The trade war has exposed critical weaknesses in the WTO’s framework. As trade becomes increasingly tied to issues of data, cybersecurity, and environmental standards, the WTO risks becoming obsolete unless it reforms.
Some potential areas of reform include:
- Revamping the Dispute Settlement Mechanism: Restoring the Appellate Body and making it more efficient
- Updating Rules on Subsidies: To address 21st-century concerns like green energy and tech competition
- Balancing Development Needs with Fair Play: Especially regarding China’s “developing country” status
Yet these reforms require consensus among members—a difficult feat in a polarised geopolitical climate.
The WTO’s Relevance: A Diminishing Force?
Although the WTO still offers a legal platform for dispute resolution, its ability to compel compliance has weakened. The US-China trade war has seen both powers bypassing the institution when it suits them, using tariffs, sanctions, and bilateral deals instead.
This signals a shift away from rules-based multilateralism to power-based bilateralism, where economic muscle outweighs legal procedure.
Conclusion: A Watchdog with Blunted Teeth
The WTO remains a critical institution for global trade, but in the US-China economic war, its role has been reduced to that of a courtroom with no bailiff. While it provides a legal framework, its authority rests on voluntary compliance—something increasingly missing in today’s fractured world order.
The US challenges its legitimacy, and China exploits its gaps. Until reforms are made, the WTO risks being sidelined in the world’s most consequential economic rivalry.
Image Courtesy: The CSR Journal
Disclaimer: The views and opinions expressed by the author do not necessarily reflect the views of the Government of India and Defence Research and Studies
References:
- World Trade Organisation – www.wto.org
- “WTO rules against US in trade dispute with China” – Reuters, September 2020
- “US says WTO ‘completely inadequate’ in China dispute” – BBC News, December 2019
- “How the WTO’s Dispute Settlement System Became a Battlefield” – Council on Foreign Relations, 2022
- “China’s Evolving Trade Strategy” – Brookings Institution, 2021
- “Trump’s Trade War Timeline” – Peterson Institute for International Economics
- “The Future of the WTO” – The Economist, January 2023
