The WTO rules, characterized by a distinct multilateralism, have effectively driven trade liberalization over the past three decades, reshaping global trade governance and ending the era of single-country dominance in global trade and its rules. However, the WTO system faces numerous challenges, among which the strategic competition between the U.S. and China remains a core issue impacting WTO reform and development. During his first term, former President Trump transitioned the U.S. from a builder to a disruptor of multilateral trade. Now, his administration may adopt an even more aggressive stance against China, particularly by pushing high-level post-border rules under the WTO framework aimed at “de-sinicization,” which poses significant challenges to WTO reform. To address this, China should proactively advocate for international regulatory cooperation, leveraging the flexible and soft governance features of such cooperation to explore high-standard international trade rules. This approach has both constructive and leading significance for developing countries participating in WTO reform and development.
The WTO rules, characterized by a distinct multilateralism, have effectively driven trade liberalization over the past three decades, reshaping global trade governance and ending the era of single-country dominance in global trade and its rules. However, the WTO system faces numerous challenges, among which the strategic competition between the U.S. and China remains a core issue impacting WTO reform and development. During his first term, former President Trump transitioned the U.S. from a builder to a disruptor of multilateral trade. If re-elected, his administration may adopt an even more aggressive stance against China, particularly by pushing high-level post-border rules under the WTO framework aimed at “de-sinicization,” which poses significant challenges to WTO reform. To address this, China should proactively advocate for international regulatory cooperation, leveraging the flexible and soft governance features of such cooperation to explore high-standard international trade rules. This approach has both constructive and leading significance for developing countries participating in WTO reform and development.
The strategic competition between the U.S. and China continues to be a critical factor influencing WTO reform. In its second term, the Trump administration may pursue three potential strategic paths:
(1) Continuing to ignore WTO rules and implement unilateral trade policies.
(2) Actively undermining WTO rules, reverting to power-based tariff negotiations, and further weakening the WTO framework.
(3) Introducing high-standard international trade rules within the WTO framework to promote “de-sinicization” through new WTO rules.
These paths may be pursued concurrently or interchangeably, all of which would have profound impacts on both the U.S. and the global trade community.
1. Continuing to Ignore WTO Rules
Under this approach, the new U.S. administration would persist in sidelining WTO rules, utilizing unilateral tariff tools to reshape the global trade system, thereby creating significant risks for the multilateral trade order. During his first term, Trump frequently employed unilateral trade measures as bargaining chips, and such zero-sum thinking is likely to intensify if he returns to office.
Trump has previously suggested creating a specialized “Bureau of Tariffs” to oversee tariffs, taxes, and foreign revenues, reflecting plans to implement trade protectionist policies that violate WTO principles. For example, imposing a 10% tariff on all trading partners and a 60% tariff on Chinese goods would escalate global trade tensions, leaving countries like China with no choice but to adopt retaliatory measures, which would have dire consequences for the global economy. According to a recent study by the London School of Economics, such tariffs could reduce U.S. GDP by 0.64% and China’s GDP by 0.68%. If China retaliates, global GDP could decline by 0.56% by 2025 and by 1.08% by 2028.
The U.S. has consistently viewed China as a strategic competitor, employing tariffs and export restrictions to weaken U.S.-China economic ties. Proposals to revoke China’s Permanent Normal Trade Relations (PNTR) status have gained bipartisan support, further cementing “decoupling” as a key direction of U.S. trade policy. However, opposition exists domestically, with Democratic lawmakers introducing legislation to limit the misuse of tariff-related executive powers. While WTO rules may not constrain unilateral U.S. trade policies, they remain critical in maintaining order among the other 165 member states.
2. Actively Undermining WTO Functionality
In this scenario, the U.S. would actively obstruct WTO operations, seeking to establish alternative trade systems outside its framework. This might involve a return to power-based tariff negotiations and the proliferation of bilateral or small-scale multilateral trade agreements designed to weaken or replace WTO rules.
While the Biden administration actively engaged in WTO reform discussions, such as those at the MC13 conference, a Trump-led administration would introduce significant uncertainty to these efforts. For instance, the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), which includes China and the EU, remains limited in impact due to the U.S.’s absence as a key participant in dispute resolution mechanisms.
Furthermore, Trump has expressed interest in negotiating bilateral agreements with Indo-Pacific countries, steering clear of large-scale regional agreements. With Republican control of Congress, the administration could leverage bilateral agreements to promote high-standard trade rules targeting China, exacerbating tensions within the global trade system.
3. Promoting “De-Sinicization” in WTO Reform
The third approach involves the U.S. advancing WTO reforms with high-standard “post-border” rules targeting China. These rules may address issues such as subsidies, state-owned enterprises, labor standards, and environmental protections, effectively excluding China from benefiting under new WTO frameworks.
The U.S. has consistently pushed for reforms addressing non-market practices and industrial subsidies in China. Efforts to establish such rules in trilateral negotiations (with the EU and Japan) reflect this intent. Once agreed upon, these rules may be promoted through plurilateral agreements with like-minded WTO members.
Agreements like the CPTPP already impose post-border rules targeting China. For instance, the TPP (now CPTPP) included provisions on labor, environment, intellectual property, and state-owned enterprises that extend beyond traditional trade topics. The USMCA further incorporated clauses targeting China, such as the “non-market economy” poison pill provision. If the U.S. and EU align on rules addressing industrial subsidies, non-market practices, and intellectual property, these high-standard post-border rules could reshape WTO governance.
China must remain vigilant and actively respond to these developments by engaging in negotiations and promoting inclusive reform agendas to ensure the WTO remains a truly multilateral institution.
4. Implications and Opportunities for Developing Countries
The choice of trade strategy by the U.S. depends on global strategic considerations and domestic political factors. However, regardless of the approach, protectionist measures not only fail to address U.S. domestic issues but also risk creating a global governance crisis, presenting opportunities for developing countries to lead WTO reform.
The U.S. faces long-standing domestic challenges, including unsustainable federal deficits, severe income inequality, and declining traditional manufacturing industries. Protectionist policies, such as imposing high tariffs, cannot address these structural problems and may exacerbate economic contraction, unemployment, and inflation. Retaliatory trade measures would also hinder global cooperation on issues such as climate change, digital trade, and artificial intelligence.
In the absence of U.S. leadership in multilateralism, countries like China have greater opportunities to play a leading role in WTO reform by promoting fair, inclusive, and sustainable trade rules that benefit the broader international community.