Why Trump's Idea to 'Fix' Global Trade System May Result in US Isolation

US trade policies have come into conflict with the established rules of global trade. However, the Trump administration has signaled that it wants to "fix" the system, arguing that other countries are using such entities as the World Trade Organization to gain leverage over the US.

US President Donald Trump is about to shatter the pillars of the global trade order: a bill titled "United States Fair and Reciprocal Tariff Act," which was leaked by Axios on July 2, would give Trump the power to ignore the major principles of the World Trade Organization (WTO).

The same day, the US President warned the intergovernmental trade regulator that Washington "will be doing something," if the US is not treated "properly." "The WTO has treated the United States very, very badly and I hope they change their ways," Trump added.

Reuters earlier reported that the US President might go even so far as to leave the organization, citing a source familiar with the matter. However, on July 2, Commerce Secretary Wilbur Ross rejected the assumption of the US's "imminent departure" from the WTO.

"[Trump has] been clear that he has concerns, that there are a number of aspects that he doesn't believe are fair. And China and other countries have used the WTO to their own advantage. We're focused on fixing the system," White House spokeswoman Sarah Sanders told a press conference Monday.

Trump's vocal discontent with the regulator comes amid Washington's tariff spree, which kicked off in March 2018. The US introduced a 25 percent tariff on steel and a 10 percent tariff on aluminum, making no exemptions for its longstanding allies. The measure came into force on June 1, triggering a wave of criticism and tit-for-tat actions on the part of the EU, Canada, Mexico and some other countries.

In addition, Washington subjected $50 billion worth of Chinese goods to high taxation and dropped the hint that it would introduce 20 percent tariffs on vehicles being imported to the US.

The "tariff war" unleashed by the Trump administration against its allies and trade partners has prompted China, India, Mexico, Norway, the EU and Canada to take action against the US through the WTO.

Citing European officials, Reuters reported on July 3 that China was calling upon EU leaders to issue a joint statement against Trump's trade policies ahead of the July 16-17 Sino-European summit.

However, the sources told the media outlet that the EU had rejected the idea of allying with China against the US: "China wants the European Union to stand with Beijing against Washington, to take sides. We won't do it and we have told them that," a European diplomat said.

Meanwhile, Russia followed suit and filed a complaint over US metal tariffs with the WTO, arguing that Washington's action was "inconsistent with provisions of the WTO's General Agreement on Tariffs and Trade (GATT) 1994 and the Agreement on Safeguards."

"Russia has filed a complaint with the World Trade Organization to challenge the additional US tariffs on steel and aluminum," Economic Development Minister Maxim Oreshkin said on June 29.

According to the regulator's website, Russia's request was circulated to WTO members on July 2.

Furthermore, on June 27, Russian Prime Minister Dmitry Medvedev ordered retaliatory measures to be worked out in response to the US steel and aluminum import duties, stressing that Washington's actions "cannot be left unanswered." The prime minister emphasized that there was no alternative to the WTO.

Meanwhile, Oreshkin presumed that a new mechanism could be created that would allow the parties concerned not take into account the US's opinion in resolving such disputes.

By threatening to upset the established trade order, Washington risks isolating itself, as other countries are likely to proceed with global trade with or without the US.