The U.S.–China trade war and subsequent truce of 2025–26 signal a shift from rules-based multilateralism to transactional bilateralism. Critically examine its implications for the WTO's dispute-settlement mechanism and India's export interests.

Q. The U.S.–China trade war and subsequent truce of 2025–26 signal a shift from rules-based multilateralism to transactional bilateralism. Critically examine its implications for the WTO's dispute-settlement mechanism and India's export interests. (15 marks, 250-350 words)

The seventh round of He Lifeng–Bessent talks at Seoul (May 2026), staging the Beijing Trump–Xi summit [5], shows the world's largest trading dyad settling disputes at negotiating tables rather than WTO panels. The shift is real, though the rules-based order has been sidelined rather than replaced.

The transactional turn: evidence and limits - Tariffs as leverage: U.S. duties on Chinese goods escalated to a 104% baseline in April 2025, met by China's 84%, before the October 2025 one-year truce — negotiated bilaterally, outside any multilateral forum [5]. - Domestic law over treaty law: tariffs rested on the IEEPA, not WTO-sanctioned safeguards, and were partly struck down by the U.S. Supreme Court in February 2026 [1]. - But not abandonment: China simultaneously filed DS633 (Feb 2025) and DS638 (Apr 2025), alleging GATT Articles I:1 and II:1 violations [1][2] — the rulebook is still invoked as a legitimacy tool.

Implications for the dispute-settlement mechanism - Both disputes remain stalled at the consultations stage; the U.S. reserved its position on whether the measures are even reviewable [3]. - DS543 exposes the deeper paralysis: a panel ruled in 2020, but the U.S. appeal into a non-functional Appellate Body froze it indefinitely [4]. - A political truce thus pauses adjudication, converting DSU timelines into bargaining chips and weakening the shield smaller members rely on.

Implications for India's export interests - Opportunity: tariff walls between the two giants aid China+1 supply-chain diversification in electronics, textiles and pharmaceuticals. - Risk: a bilateral truce restores Chinese volumes and may divert rerouted goods into third markets, undercutting Indian exporters. - Structural risk: the same IEEPA-style unilateral tariff instrument can be turned on India, with no reliable appellate remedy.

The episode confirms that power, not procedure, is arbitrating global trade. India's interest lies in pressing for Appellate Body restoration at the WTO while hedging through diversified FTAs and value-chain upgradation — securing predictability that transactional bargains cannot guarantee.

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Sources: 1. WTO DS633: United States — Additional Tariff Measures on Goods from China — 10%→20% IEEPA-based tariffs; GATT Articles I:1, II:1 claims 2. China initiates WTO dispute regarding US "reciprocal tariffs" — WTO News, 8 April 2025 — DS638 filing; GATT 1994 and related agreement violations alleged 3. WTO DS638: United States — Universal and Country-specific Additional Duties on Imports from China — consultations stage; U.S. reservation on reviewability 4. WTO DS543: United States — Tariff Measures on Certain Goods from China — 2020 panel report; U.S. appeal to a non-functional Appellate Body 5. The Hindu — "China, U.S. to hold trade talks in Seoul ahead of expected Trump–Xi summit", 11 May 2026 — Seoul talks, Beijing summit, October 2025 truce and tariff escalation