On September 15, 2020, a dispute settlement panel of the World Trade Organization (WTO) ruled that President Donald Trump’s tariffs against China violate the General Agreement on Tariffs and Trade (GATT) because they are prima facie inconsistent with Articles I:1 (Most-favored Nation Treatment) and certain of the GATT’s schedules and concessions, and the United States has not met its burden of demonstrating that the tariff measures it took under Section 301 of the Trade Act of 1974) are justified under GATT provisions for exceptions and necessary “to protect public morals.”
China filed the WTO complaint in 2018 when the Trump administration, under U.S. Trade Representative Robert Lighthizer, determined that the acts and policies of China related to technology transfer, intellectual property and innovation were unreasonable and discriminatory and implemented 25 percent tariffs on more than $200 billion worth of Chinese goods imported into the United States on an annual basis. China argued that under the most-favored nation clause, the United States could not impose tariffs unilaterally against another WTO member country. The three-person WTO dispute panel agreed and stated: “China has demonstrated that the additional duties apply only to products from China and thus fail to accord to products originating in China an advantage granted to the like product originating in all other WTO Members.”
While this ruling is the first report from a WTO dispute settlement panel to address the Trump administration’s wide use of tariffs as a retaliatory trade action, it will have little immediate impact. The panel’s ruling is certain to be appealed by the United States to the WTO’s appellate body. Since the Trump administration has refused to agree to the appointment of new appellate judges at the WTO to fill vacancies, the appellate body no longer has a quorum and is unable to issue any final and actionable decisions. Upon learning of the decision, President Trump stated to the press that “we’ll have to do something about the WTO because they’ve let China get away with murder…. But I’m not a big fan of the WTO — that, I can tell you right now.” Ambassador Lighthizer added in a press statement: “This panel report confirms what the Trump Administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices…. The United States must be allowed to defend itself against unfair trade practices.”