With Trump back in the White House, the global trading system is in a state of volatility, uncertainty, complexity and ambiguity. Trump introduced the America First Trade Policy with the objective of ‘Making America Great Again’.
The Trump administration has made several trade policy announcements that aim to change the ‘terms and conditions’ under which the US intends to engage with its major trading partners. Some key trade policy measures include high import tariffs on goods coming from top trading partners, regulating the trade of critical minerals, investigating unfair trade practices, trade-induced national security risk and the manipulation of exchange rates.
While these actions aim to protect the US’s manufacturing industries and reduce trade deficits, they fundamentally raise the question of the legitimacy and credibility of the WTO-led rules-based global trading system, which has played a pivotal role in growth, development and global peace.
Questioning the legitimacy of the WTO
Trump’s idiosyncratic trade policy undermines the fundamental tenets of the WTO. The US’s reciprocal tariffs and trade plans violate many provisions of the WTO, most notably the most-favoured nation principle.
The US’s policy stance on the WTO became clearer and louder from the 2025 Trade Policy Document released on March 3.
The trade policy document contended that the “viability and durability” of the WTO to deal with 21st century trade issues is a serious question. The US believes that the WTO has failed as an institution as it could not conclude a single multilateral agreement that liberalises market access. The document said that the fundamental reason for the WTO’s failure lies in its institutional framework.
The trade policy document also lambasted the concessions and carve-outs sought by developing economies such as India and Brazil. For instance, negotiations on non-agricultural market access were derailed in 2008 when countries used their self-declaring mechanism to assert their status as developing countries to obtain special and differential treatment (SDT) and build pressure to seek substantial concessions, thereby undermining the desired ambition of negotiations for a successful outcome.
Multilateralism to bilateralism
The trade policy stance of the US under the Trump administration clearly demonstrates a shift from multilateralism to bilateralism.
The transition from a rules-based global trade order to a focus on bilateral agreements will have significant economic repercussions for developing and low-income economies. Bilateralism undermines their ability to negotiate trade agreements that safeguard economic and strategic interests. In contrast, a multilateral trade framework allows developing low-income countries to unite and collectively challenge trade rule-making, which is detrimental to their economic and trade interests.
India and Brazil, backed by the G33 group of developing nations, took a bold and proactive approach to influencing the Doha Round negotiations, thereby challenging the longstanding hegemony of the US in global trade governance.
Strategies for developing countries
Considering the intricate international trade landscape, it is crucial for developing nations to collaborate and protect their economic and trade interests. In this realm, they should focus on a three-pronged strategy to mitigate and counter the potentially deleterious impacts of the US’s new trade policy.
First, it is imperative for developing economies to focus on collective effort. They should focus on establishing new regional trade partnerships or integrating them into existing mega-regional agreements such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. By forming new regional alliances, they can reduce their reliance on the US and create new trade and investment prospects.
A recently concluded inter-regional trade agreement between the EU and Mercosur offers a good example of a counter-mechanism in the view of looming global trade protectionism and the weakening of the multilateral trading system.
Second, developing countries should focus on exploring possible opportunities for trade pacts with economies such as Canada, Mexico, Vietnam and the EU, which have been targeted by the Trump administration under its reciprocal tariff and trade plans. The recent visit of EU President Ursula von der Leyen to India underscores the importance of speeding up longstanding bilateral trade agreements between India and the EU to minimise the potential economic and trade impacts of the Trump tariff war.
It is important to note that Trump led the tariff war, and that the decision to end the Ukraine-Russia war without involving the EU on the negotiating table has strained US-EU relations. The ongoing rift between the US and the EU gives a competitive edge to developing countries such as India to negotiate trade agreements with the EU in more favourable terms.
As the EU aims to broaden its trade partnerships and lessen its dependence on the US, developing economies can capitalise on this development to negotiate more favourable trade agreements that are aligned with their economic and trade development imperatives.
Third, developing economies must formulate effective retaliation strategies. Resource-rich countries can place restrictions on mineral exports, which will impact the downstream manufacturing firms of the US and their profits. China’s ban on the export of rare earths serves as a good example, and developing countries should consider a similar strategy.
Developing countries can also explore the scope of anti-coercion mechanisms to build up economic pressure in the US. Disrespecting the intellectual property rights (IPR) of the US’s IPR holders can significantly impact the economic interests of the US. This may persuade the Trump administration to reconsider its tariff war strategy.
Trump’s tariff war is inherently destructive and violates the principles of the rules-based global trading system. The potential impact of the tariff war on the global economy can be mitigated by fostering regional trade and strategic partnerships, formulating appropriate retaliatory measures and policy coordination. This is how developing countries could better weather the storm.
Naman Jain is a final-year student at the Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University. Surendar Singh is an associate professor at the Jindal School of Liberal Arts and Humanities. Views are personal.
