Gunboat trade policy: how Trump’s tariffs have ended ‘free-trade’ orthodoxy

Like his gunboat diplomacy in Venezuela and the Middle East, Donald Trump’s approach to trade policy is a throwback to the 19th century — when protectionism vs free trade was the choice facing Europe’s colonial powers and the US. 

The rationale behind the Trump tariffs, spelled out during his successful presidential election campaign in 2024, was that successive US governments had sold their own industries down the river in pursuit of free trade.  

His ire towards Europe was, primarily, that there were too many German BMWs and Mercedes on American roads, and not enough Chrevolets. 

Yet regardless of their economic effects, tariffs have become an accepted part of the trade landscape since the US president’s so-called ‘Liberation Day’ tariffs on 2 April last year. 

The rates imposed by Trump last year ranged from 100 percent (briefly) on Chinese imports, to 10 percent or 15-percent rates for most of the world.

The EU, initially, was threatened with 25 percent in additional duties. Chinese imports now face an average US tariff of around 48 percent.

February’s ruling by the US Supreme Court that the tariff regime was unconstitutional has reduced but not eliminated the levies. Trump immediately re-introduced a global 10-percent rate which he quickly raised to 15 percent.  

“One year after so-called ‘Liberation Day’, it’s clear: this has turned into a ‘Tariff Chaos Day’”, tweeted Bernd Lange, the chairman of the European Parliament’s international trade committee on Wednesday (1 April). 

Lange added that the Supreme Court ruling and ongoing uncertainty were hurting “business and trust”, describing this as the “cost of unilateralism”. 

Yet the tariffs look like they are here to stay.  

Earlier in March, despite MEPs being openly critical of the Trump tariffs, the European Parliament approved the EU’s trade deal with the US that imposes 15 percent duties on all EU exports to the US until 2028.  

WTO deadlock 

“The world order and multilateral system we used to know has irrevocably changed. We will not get it back… We must look to the future,” the WTO director-general, Ngozi Okonjo-Iweala told delegates at the start of the organisation’s biannual summit in Cameroon.  

But attempts to agree a ‘reform programme’ for the WTO to shape that future made little progress over the four day summit that ended in the small hours of Monday morning (30 March). 

Instead, there was deadlock between plan for reform or even on extending a moratorium on e-commerce, with Brazil blocking a bid by the United States and others to prolong a moratorium on duties for electronic transmissions like digital downloads and streaming. 

For their part, US delegates linked the digital moratorium to any agreement on the WTO’s future. 

Ahead of the summit, Okonjo-Iweala had given her support for proposals made by the United States and the EU to re-open the WTO’s “Most Favoured Nation” (MFN) principle, which is designed so that countries treat each other equally in trade terms. MFN is one of the building blocks for the free trade orthodoxy promoted by the WTO for decades and is supported by China and most of the rest of the world. 

Since the WTO can only make decisions by consensus, re-opening it was unlikely to fly. The WTO has always been one of the most sclerotic multilateral institutions.

Even in the 1990s and 2000s, when the pro-free trade and globalisation orthodoxy was at its apex, ministers still struggled to make progress on ending agricultural subsidies.  

EU’s contradictory position

But while the Trump administration’s opposition to MFN is obvious, the EU’s position is more contradictory. 

The EU Commission insists that it is the world’s main advocate for ‘rules-based trade’. Its main reaction to the Trump tariffs was a promise to diversify its trade relations to reduce reliance on commerce with the US. After concluding the Mercosur trade pact last year, the EU executive has already signed off on new agreements with India and Australia. A raft of others are in the pipeline, including the likes of Thailand, the UAE, Gulf Cooperation Council and South Africa. 

In their haste to broker deals, the commission appears to have dropped some of its previous ambition. 

During the Barroso and Juncker commissions, when the EU was negotiating, ultimately fruitlessly, with the Obama administration on a trade pact, the EU’s trade officials briefed reporters that tariff and quota-free trade was the bare minimum they were hoping for.

To get maximum economic value, they said, a trade accord should address ‘non-tariff barriers’ by harmonising rules on procurement, goods and services. 

The EU-Canada trade deal, which was finalised in 2015, is probably the EU’s most ambitious in these terms.