US signals a shift in global trade with Trump's new tariffs

US Secretary of State Marco Rubio has signaled a new approach to trade relations between the US and countries around the world, following President Donald Trump's announcement of reciprocal tariffs on April 2. The US will impose tariffs at the same rate that other countries charge on American goods in an effort to create fairness in trade.

Rubio spoke on CBS's Face the Nation on Sunday, stating that this policy changes the US's trade stance with all countries, not targeting any specific nation.

" This is a global issue. It’s not against Canada, it’s not against Mexico, it’s not against the European Union; it’s about all countries," Rubio said. "And based on a new foundation of fairness and equality, we will begin bilateral negotiations with countries around the world about new trade agreements that are fair to both sides."

This move aligns with President Trump's speech last week, where he announced that the US would begin implementing reciprocal tariffs on April 2, charging the same rate as other countries impose on US goods.

"Other countries have been using tariffs against us for decades, and now it’s our turn to impose tariffs on them," President Trump said.

Recently, President Trump threatened to impose a 200% tariff on imports of wine, cognac, and other alcoholic beverages from Europe, opening a new front in the global trade war that has caused turmoil in financial markets and raised concerns about an economic recession.

While the Trump administration believes that imposing tariffs will help reduce the US trade deficit, most economists disagree with this idea, arguing that a trade deficit does not necessarily mean a loss, and in some cases, it may reflect a strong economy.

Experts warn that imposing tariffs may not help reduce the trade gap, and if it does reduce the deficit, it could indicate a decline in US purchasing power instead.

Currently, the global trading system operates under a multilateral framework, with the World Trade Organization (WTO) as the main body overseeing trade rules. The WTO was established in 1995 to serve as a forum for trade negotiations between countries and as a mechanism for resolving trade disputes.

Under this system, trade negotiations take place through multilateral negotiation rounds that involve all member countries. Currently, the WTO has 164 member countries, covering more than 98% of global trade. The WTO's dispute settlement mechanism allows member countries to file complaints if agreements are violated, and the WTO Appellate Body reviews decisions in cases of appeals.

However, in recent years, the multilateral trading system of the WTO has faced several challenges, such as the stagnation of the Doha Round negotiations, delays in modernizing regulations, and the US blocking the appointment of new judges to the Appellate Body, which has caused a paralysis in the WTO’s dispute settlement system.

Supachai Panitchpakdi, former Director-General of the WTO, gave an exclusive interview discussing the impact of US tariff policies on global trading partners. He noted that these policies are causing the US economy to slide into recession, despite its strength in the past two years.

“The US tariff hikes on other countries are pushing the US economy into recession. What’s even more concerning is that the trade retaliation between countries is causing the US to feel increasingly destabilized,” Supachai said.

The impact of the trade war is not limited to the US alone; it also affects the global trading system as a whole. When countries targeted by US tariff hikes turn to expand markets outside the US, the proportion of US trade in the global trading system decreases. Eventually, the total volume of global trade contracts as well.

“If America is not doing well, the world is not doing well,” is a sentiment that highlights the competition among major powers, which is not a zero-sum game. It is a game where all parties can benefit if there is good cooperation. The mindset of President Trump and his economic team, who believe that making America great again is a solo effort, is not feasible in the new world order.

It will be interesting to watch how the new approach that the US is pushing under President Trump’s second term, focusing on bilateral agreements instead of multilateral negotiations, will bring about significant changes to the global trade order that has been in place for over two decades.