When the Referee Loses His Whistle Amid Trump’s Tariff Blitz
US President Donald Trump at his inauguration! (Image The White House)
Winning rules-based order back will take exactly the kind of messy, racy, unglamorous grind the moment demands.
By P SESH KUMAR
NEW DELHI, August 9, 2025 — The World Trade Organization (WTO) was created in the 1990s as the great referee of global trade, promising a world where rules, not raw power, shaped commerce. Three decades later, the referee has lost the whistle.
Disputes drag on for years, the “national security” loophole has been stretched beyond recognition, its appellate court is paralysed, and heavyweight economies now bypass it entirely. The United States under Donald Trump has turbocharged this breakdown — imposing punitive tariffs not just on rivals like China, but also on allies, including India, and now escalating to an extra 25% duty on key Indian goods.
India has pushed back through the WTO, calibrated retaliation, and strategic cosying up to Russia and China. The latest US–India trade clash exposes flaws in the WTO, and any revival will require not grand speeches, but a dozen gritty, practical levers pulled together.
The WTO was meant to be the traffic cop of global trade — keeping goods moving smoothly, pulling over the odd violator, and handing out fines when needed. In practice, it has become the kind of cop who logs your complaint, promises to investigate, and sends you the verdict two years later — by which time the road has been rebuilt and the original offence is ancient history. Its dispute settlement system, the core enforcement tool, is slow, reactive, and toothless against those who refuse to play by the rules.
The cracks were always there, but Trump’s first presidency swung a wrecking ball through them. In 2018, he slapped 25% tariffs on steel and 10% on aluminium imports — not just on China, but on Canada, the EU, Japan, South Korea, and India — citing “national security”.
It was a stretch so implausible that even the Pentagon said the military’s metal needs were a drop in the bucket. The WTO panels eventually ruled the tariffs illegal, but the decision came four years too late and Washington simply ignored it.
Allies retaliated with tariffs on politically sensitive US exports like bourbon and Harley-Davidsons. The tariffs themselves? Still there until side deals — negotiated entirely outside the WTO — patched over the fights.
The “national security” loophole in Article XXI of GATT was supposed to be a wartime escape clause; in Trump’s hands it became a magic shield for economic protectionism. And the WTO couldn’t police it because its “Supreme Court” — the Appellate Body — had been shut down by Washington in 2019.
Without it, losing parties could “appeal into the void,” freezing rulings forever. That’s exactly what happened in the US–China tariff war: WTO panels ruled against both sides, but each filed an appeal into nothingness and carried on regardless, eventually cutting a “Phase One” deal in 2020 — all outside Geneva.
For smaller economies, WTO rulings still have teeth because retaliation hurts both sides. But when a heavyweight like the US or China is in the dock, most countries hesitate to hit back fully. The fear of losing access to giant markets drives them towards bilateral negotiation rather than WTO litigation.
That imbalance turns the WTO’s rulebook into more of a “polite suggestions manual” for the powerful, while smaller players get held to the letter of the law.
India has lived this from both ends. In 2019, Trump abruptly removed India’s duty-free privileges under the Generalized System of Preferences (GSP), affecting $5.6 billion in exports. Officially, it was because India wasn’t giving “equitable and reasonable access” to its markets; unofficially, it was another brick in Trump’s tariff wall. India responded with retaliatory duties on U.S. almonds, apples, and walnuts — aimed at politically sensitive states — and challenged the U.S. metals tariffs at the WTO.
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The US, in turn, challenged India’s retaliatory tariffs. The cases crawled through the WTO pipeline, but the real action happened elsewhere — in sectoral deals and strategic bargaining.
Then came Trump’s second act. In August 2025, he escalated dramatically, slapping an additional 25% punitive tariff on a swathe of Indian exports — textiles, gems, footwear, auto components — pushing some duties to a staggering 50%.
The official line? Punishment for India’s continued oil purchases from Russia. The subtext? A warning shot about strategic alignment. Pharmaceuticals and smartphones were exempted, a clear nod to sectors the US still values.
Moody’s has already warned the move could derail India’s manufacturing ambitions. India’s reply was part defiance, part diversification. Publicly, it blasted the tariffs as “selective and unfair,” insisting its Russian oil trade was a matter of energy security.
Quietly, it accelerated its maritime corridor to Vladivostok, deepened trade ties with Russia, and leaned into BRICS cooperation with China — a calculated signal that if Washington closed one door, New Delhi could walk through another.
But there is a possible partial workaround to the WTO’s deadlock: the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). Launched in 2020 by the EU and Canada, the MPIA is a club of WTO members — now including China, Brazil, Japan, and others — who agreed to bypass the crippled Appellate Body by using arbitration under Article 25 of the WTO rulebook.
If two MPIA members have a dispute, they can appeal to this “private league” court and actually get a binding decision, instead of letting the case die in the void. The U.S. has refused to join, which means it can’t be used against Washington — but for disputes among MPIA members, it’s one of the few functioning parts of the WTO engine.
India, already an MPIA participant, could use this pathway more aggressively to lock in enforceable wins against other trading partners, even if it can’t yet force US compliance.
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This latest US–India clash is a microcosm of the WTO’s crisis. In theory, the WTO should be the arena where the fight is resolved, the rulings enforced, and the tariffs removed.
In practice, with the appeals system paralysed and political will absent, the WTO is a bystander while the two powers joust through bilateral and geopolitical channels.
And yet, for all the dysfunction, abandoning the WTO entirely would mean slipping back to the trade anarchy of the pre-1990s GATT era — tit-for-tat tariffs, zero predictability, and power politics as the only currency. That’s why even the wounded institution needs patching. The reform wishlist is no secret: Restore the Appellate Body, but with tighter timelines and guardrails against “judicial overreach” to meet US objections; Narrow the “national security” exception to genuine crises, with independent verification; and create fast-track lanes for urgent disputes and allow interim injunctions to freeze contested measures.
Also, it is incumbent to give small economies collective retaliation rights so they can match the punch of big offenders. Modernisation of the rulebook for the 21st century — digital trade, green subsidies, industrial policy — so it reflects the battles actually being fought is also key to reforms.
Until that happens, survival is about workarounds. Use Article 25 arbitration and the MPIA among willing members to bypass the appeals void. Exploit domestic US tariff-review and exclusion processes to chip away at duties from the inside. Target retaliation at politically strategic products, not scattergun sectors.
Cut sectoral ceasefires in high-stakes industries — metals, chips, EV batteries — to cap escalation. And invest in plurilateral deals on the new frontiers of trade, so that coalitions of the willing set enforceable norms even if the whole WTO can’t.
Looking Into Future
Reviving the WTO in an era of punitive superpower tariffs won’t be a single grand gesture in Geneva; it will be carpentry. For India, that means staying in the WTO ring — because even a limping rules-based system is better than none — while hedging with sectoral truces, targeted retaliation, and strategic diversification.
It means pressing for appeal-proof enforcement mechanisms and leading plurilateral rule-making in digital trade, climate-linked measures, and critical minerals. And it means keeping lines open with Washington, because the day will come when the political calculus shifts and the U.S. needs India more than it needs its tariff stick.
Without such coordinated pressure — a dozen small levers pulled together — the WTO risks sliding into irrelevance, the US risks pushing India further into rival spheres, and the world risks returning to a trade order where might makes right.
The rules-based order was built slowly, painfully, and imperfectly. Losing it will be easy. Winning it back will take exactly the kind of messy, racy, unglamorous grind the moment demands.
(This is an opinion piece, and views expressed are those of the author only)
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