The international order is beginning to feel like the League of Nations. Donald Trump wants a "might is right" world and his steel and aluminium tariffs are a ploy to create it.
These tariffs, whether by coincidence or design, continue President Trump’s ongoing efforts to undermine the legitimacy of the World Trade Organization (WTO) dispute settlement process.
The tariffs were ostensibly levied on national security grounds, and the WTO allows for trade policy to protect industries relevant for national security. But this has been invoked so rarely and narrowly that there is little precedent as to what constitutes a legitimate national security concern.
Indeed, the WTO will be wary of finding against a state that invokes national security concerns – it is not a politically sustainable position for an unelected international body to claim it understands a state’s national security needs better than the state’s own government, no matter how implausible the justification might be on its face. President Trump has already said he will withdraw the US from the WTO if they receive an unfavourable ruling, and such a ruling would provide a justifiable reason.
Meanwhile, the Trump administration refuses to approve any new members of the WTO Appellate Body, which adjudicates disputes. This will leave it without a quorum to decide cases against the US, China or India when the next Appellate Body member’s term expires in September, and without the requisite three members to adjudicate any disputes by the end of 2019.
The Ugly American.
In a world where there are no internationally predictable rules, most countries faced with protectionist actions, crudely, have two options – retaliate or concede. If they choose to retaliate, the optimal strategy is to cause enough pain to the political leadership of the protectionist country that they will back down. This is the course of action that the EU and China have so far taken, with the hope that powerful political constituencies in the US will successfully lobby the administration to change course.
However, this can only be effective for large economies that the US exports to significantly. For smaller countries without significant leverage, the alternative is to concede and try to negotiate a favourable settlement, which will still be asymmetrical. This course of action was taken by South Korea in response to the tariffs, which agreed to export quotas on steel in exchange for a permanent exemption.