Trump is right, global trade is unfair – but US is no victim

There is no sense in which countries like Myanmar, Madagascar and Lesotho have ‘pillaged’ or ‘plundered’ the US

Introducing his dramatic new regime of global tariffs in the Rose Garden last week, President Trump made clear his views concerning the unfairness of the global trading system for the United States. The US, in his already infamous phrase, has been “looted, pillaged, raped and plundered” by its trading partners.

Since then, Peter Navarro, a senior adviser to President Trump, has also recently decried the ways in which foreign nations “strangle American exports, unfairly boost their shipments to the US, and wall off their own markets”.

In a welcome development, a substantial proportion of the Trump administration’s ‘reciprocal’ tariffs were paused on Wednesday for 90 days. Even so, it is clear that this sense of grievance remains, and will surely continue to inform the views of those driving US international economic policy.

US President Donald Trump speaks in the Oval Office of the White House in Washington, DC. Picture: Kevin Dietsch/Getty Images | Getty Images

Predatory policies

The question of the fairness of the global trading system is an important one. One of the lessons of the current turmoil, after all, must be that perceptions of fairness are as least as important for the long-term stability and sustainability of any global trading system as its efficiency measured in economic terms. Is the system we have lived with for almost four decades unfair, and if so, for whom? By what measure can we assess its fairness?

It has long been a widespread complaint within the United States, and other countries besides, that the system’s unfairness comes from the ways in which it has permitted and enabled China to dominate global trade flows through the pursuit of predatory policies including forced technology transfer, currency manipulation and industrial subsidisation.

There is a decent case to be made here – though the reality is more complicated than often portrayed. It turns out to be almost impossible to define precisely the difference between legitimate and ‘predatory’ policies without assuming, hubristically, that there is a single model of economic development which is right for all countries, at all times. And, if that is true, then the line between ‘fair’ and ‘unfair’ competition can be just as hard to pin down.

A colonial legacy

For many developing country governments, on the other hand, the idea that the global trading system disadvantages the US has things precisely backward. For decades, developing countries have been pointing out the ways in which the current rules – of global finance, as well as global trade – are arranged so that things work to the advantage of the industrialised world.

Historically, a number of advanced economies have used tariff escalation as a means of protecting their domestic manufacturing sectors, without breaking international trade rules. Although on their face they apply equally to all, in practice Word Trade Organisation rules permit the continuation of huge agricultural subsidy programmes in developed countries, even as most developing countries are precluded from doing the same.

WTO rules have also been used to internationalise US-style intellectual property protections, largely to the benefit of firms in the industrialised world, which own the vast majority of global patents. This is to say nothing of the degree to which the current global trading system is underpinned by patterns of comparative advantage established in significant part during the colonial period.

It is true that this story, too, has its share of simplifications and elisions – some developing countries, evidently, have done quite well from the current system, even if many others have emphatically not. But the point remains that fairness is always a two-way street.

Trump’s flawed reasoning

So, what yardstick of fairness underpins Trump’s new ‘reciprocal’ tariffs? The idea, often heard, that the US is simply imposing on its trade partners the same tariffs as they impose on the US is misleading.

As those familiar with the arcane world of tariffs know well, and as WTO data makes clear, Vietnam does not impose an average tariff on the US of 46 per cent, nor does Madagascar impose an average tariff of 47 per cent. Instead, the White House has used a formula based almost entirely on the bilateral goods trade deficit between that country and the US in 2024.

As many have pointed out, this formula is methodologically flawed for any number of reasons. But it is also, importantly, inconsistent with any reasonable conception of fairness. Assuming they come back into effect after the recent pause, the burdens they impose in terms of lost exports, lost jobs, and increased poverty will fall most heavily on those countries – such as Myanmar, Madagascar, Laos, Lesotho – which are least able to bear them, and which have hardly benefited disproportionately from the existing system. There is no sense in which these countries can be said to have “pillaged” or “plundered” the US.

Moreover, the formula penalises mostly severely those countries – Sri Lanka, Bangladesh, Vietnam, Malaysia, Thailand – which have followed the advice of international institutions, responded to clear signals from the major economic powers, and successfully pursued a strategy of development through integration into global value chains.

Defining fairness

If there is a silver lining in the US’s apparent new posture towards global trade, it is that it puts in stark relief questions about the fairness of the global trading order.

Who has benefitted from the existing system, and what role have the rules of global trade played in distributing gains from trade? What are the burdens associated with maintaining an open trading system, who ought to bear them, and in what proportion should they be distributed?

It’s unlikely the nations of the world are all going to agree on a measure of ‘fairness’, but if a new multilateral system is to emerge from the current turmoil, it’s a conversation we will have to have in earnest.

Andrew Lang is a professor of international law and global governance at the University of Edinburgh