The resurgence of tariff-based trade policy by the United States poses structural challenges to the WTO-led multilateral trading system. Discuss.

Q. The resurgence of tariff-based trade policy by the United States poses structural challenges to the WTO-led multilateral trading system. Discuss. (15 marks, 250-350 words)

The WTO's founding bargain rests on bound tariffs and non-discrimination under Article I (MFN). Washington's return to unilateral, negotiated-outside-Geneva tariffs erodes that bargain — by end-February 2026 only 72% of world trade moved on MFN terms [1], making this a structural rather than cyclical stress.

Scale of the tariff resurgence - Broad duties imposed on all G7 partners in 2025, extended in June 2026 to threatened 10–12.5% tariffs on 60 trading partners, including India, the EU, the UK and Australia [2]. - Tariffs as non-trade leverage: a threatened 100% duty on French wines to force withdrawal of France's Digital Services Tax [2] — trade instruments deployed for regulatory coercion. - These measures are neither bound concessions nor notified FTAs, placing them outside WTO schedules [1].

Structural challenges to the multilateral order - Non-discrimination hollowed out: shrinking MFN coverage converts rules-based access into bilaterally bargained access [1]. - Enforcement vacuum: the Appellate Body has been inoperative since December 2019 for want of appointments, allowing adverse panel rulings to be "appealed into the void" [3]. - Rule-making stalled: dispute settlement reform remains unfinished business carried past the Ministerial Conference [4]. - Power asymmetry: bargaining substitutes for adjudication, disadvantaging smaller and developing economies [3].

Economic consequences - WTO projects merchandise trade growth slowing to 1.9% in 2026 from 4.6% in 2025, and to 1.4% if energy prices stay elevated after the Strait of Hormuz disruption [1]. - Investment chills in tariff-exposed, value-chain-intensive sectors — textiles, electronics, machinery [1].

Countervailing resilience - Trade has not collapsed: largely tariff-exempt AI-enabling goods drove 42% of 2025 trade growth [1]. - India has hedged through the India–UK CETA and India–Oman CEPA, with record exports in FY 2025-26 [5].

Thus unilateralism erodes the WTO's rule-making and rule-enforcing pillars simultaneously, yet the system retains adaptive capacity. The way forward lies in restoring a functioning appellate tier, building plurilateral reform coalitions, and — for India — combining FTA diversification with sustained advocacy within Geneva. A credibly enforceable WTO remains the surest guarantee of predictable market access for the developing world.

(~325 words)

Sources: 1. WTO, Global Trade Outlook and Statistics — March 2026 — 72% MFN trade share, 1.9%/1.4% trade forecasts, Hormuz energy shock, GVC-sector investment fall, AI-goods share of trade growth 2. G7 allies seek to narrow differences with Donald Trump at France summit, The Hindu, 12 June 2026 (link not retrievable) — 10–12.5% tariff threats on 60 partners; 100% French wine tariff threat over the Digital Services Tax 3. WTO, Dispute Settlement Reform — Appellate Body inoperative since December 2019; shift to power-based bargaining 4. WTO Reform — Post-MC14 Briefing Note — unfinished dispute settlement and reform agenda 5. PIB, "India's External Performance Demonstrates Resilience to Global Shocks: Economic Survey 2025-26" — India–UK CETA, India–Oman CEPA, export diversification and record exports