THE INCOMPATIBILITY OF TRUMP’S RECIPROCAL TARIFF POLICY WITH WTO OBLIGATIONS

The MFN Principle: A Pillar of Global Trade Under Threat

International trade has long been governed by multilateral agreements that promote predictability and fairness. A fundamental principle underpinning this system is the Most Favoured Nation (MFN) rule, which requires World Trade Organization (WTO) members to grant equal trade advantages to all other members. However, in a significant shift from established trade norms, the Trump administration introduced a reciprocal tariff policy, claiming it would rectify perceived trade imbalances and protect U.S. industries. This policy dictates that if a foreign country imposes higher tariffs on U.S. goods than the U.S. imposes on theirs, the U.S. will match the higher tariff rate. While this approach appears to promote fairness, it contradicts WTO regulations, particularly under GATT 1947, Article I, which mandates equal tariff treatment for all members. This paper argues that the reciprocal tariff policy violates WTO law, creates severe administrative and economic burdens, and risks escalating global trade conflicts.

How Reciprocal Tariffs Undermine Free Trade

A cornerstone of WTO trade law, the MFN principle (Article I, GATT 1947) ensures that a country cannot selectively apply different tariff rates to different WTO members. The Trump administration’s reciprocal tariff policy explicitly violates this principle by allowing tariffs to vary based on bilateral relationships rather than being applied uniformly across all trading partners.

For example, under this policy, if India imposes a 10% tariff on U.S. aluminium while Mexico imposes a 5% tariff, the U.S. would respond with reciprocal tariffs of 10% on Indian aluminium and 5% on Mexican aluminium. This results in discriminatory tariff rates for the same product, contradicting the MFN obligation to offer the same tariff rates to all WTO members unless justified under an exemption, such as a free trade agreement. 

The WTO Implications of Trump’s Tariffs

Beyond violating WTO law, implementing reciprocal tariffs presents an enormous administrative challenge. With 13,000 tariff line items and trade relationships with over 200 countries, the U.S. government would be required to track and enforce approximately 2.6 million different tariff rates. Maintaining such a system would demand continuous updates based on foreign tariff fluctuations, significantly increasing bureaucratic complexity, trade unpredictability, and enforcement costs.

Additionally, WTO members have voluntarily limited their national sovereignty in trade matters by agreeing to multilateral trade commitments that override domestic policies. The reciprocal tariff policy disregards this legal framework, effectively undermining U.S. commitments under the WTO and inviting potential disputes. A precedent for such legal challenges was set in 2018 when the U.S. imposed 25% tariffs on steel and 10% on aluminium, primarily targeting China. The U.S. justified these tariffs under GATT Article XXI (national security exceptions), but the WTO panel later ruled them inconsistent with global trade rules, reinforcing the obligation of non-discrimination in trade policies.

Economic Fallout: Why Reciprocal Tariffs Hurt More Than Help

While the Trump administration argued that reciprocal tariffs would reduce trade deficits and protect American jobs, economic studies and public opinion suggest otherwise. Tariffs typically lead to higher costs for domestic consumers and businesses, as companies pass increased import costs onto buyers. A Marquette Law School poll found that only 24% of respondents believed tariffs would benefit the U.S. economy, including just 12% of independents and 4% of Democrats. Even among Republicans, support for tariffs remained below 50%, indicating widespread scepticism about the policy’s effectiveness.

For over 70 years, the MFN principle has facilitated the progressive reduction of global tariffs, ensuring that U.S. exporters receive equal treatment in foreign markets. Abandoning this principle in favour of a bilateral, retaliatory tariff structure would not only harm U.S. economic interests but also weaken the credibility of WTO trade rules, encouraging other nations to engage in discriminatory trade practices. If major economies followed suit, the result could be a fragmented, unpredictable trade landscape that undermines the benefits of free and fair trade.

The Flawed Logic Behind Supporting Reciprocal Tariffs

Supporters of reciprocal tariffs argue that the U.S. has long faced unfair trade practices, with other nations imposing higher tariffs on American goods while benefiting from low U.S. tariffs. They claim that the MFN principle forces the U.S. into disadvantageous trade terms, preventing it from retaliating against non-reciprocal tariffs. Additionally, they argue that sovereign nations have the right to set their own trade policies, and the U.S. should prioritize its own economic interests over WTO commitments when international rules fail to ensure fairness.  

However, this argument overlooks key economic realities. Trade imbalances stem from broader macroeconomic factors, not just tariffs, and abandoning MFN would destabilize global trade rather than restore fairness.  History shows that tariffs often provoke retaliation, as seen in 2018 when U.S. steel and aluminium tariffs led to countermeasures from key trading partners, harming American exporters. Instead of forcing nations to lower tariffs, reciprocal tariffs would likely trigger trade wars and economic uncertainty.  

Why the U.S. Should Rely on WTO Mechanisms

While the U.S. has the sovereign right to impose tariffs, WTO membership is a voluntary commitment, granting access to global markets in exchange for adherence to non-discrimination principles. If the U.S. finds certain trade relationships unfavourable, the solution lies in multilateral negotiations and dispute resolution mechanisms, not in a policy that invites retaliation and weakens trade stability.

Trump’s reciprocal tariff policy presents legal, administrative, and economic challenges that outweigh any potential benefits. By violating the MFN principle, it undermines WTO rules, risks trade retaliation, and increases costs for businesses and consumers. The administrative burden of tracking millions of individualized tariffs would make U.S. trade policy unmanageable, further disrupting global trade relationships.

More broadly, if major economies like the U.S. abandon WTO commitments, other nations may adopt similar discriminatory tariff policies, leading to a fragmented and unstable global trade system. Rather than pursuing bilateral retaliation, the U.S. would benefit from leveraging multilateral negotiations and working within the WTO framework to address legitimate trade concerns. While reciprocal tariffs may appeal to superficial notions of fairness, they fail to uphold the core principles of international trade. Instead of strengthening the U.S. economy, they threaten to destabilize decades of progress in global trade cooperation a risk the U.S. cannot afford to take.

Author: Mahi Agrawal

BA.LLB 2026

Jindal Global Law School

O.P. Jindal Global University