In February 2025, US President Donald Trump announced the Fair and Reciprocal Trade Plan (hereinafter ‘F&RP’), a comprehensive overhaul of US trade policy aimed at ‘rebalancing’ what he views as a grossly unbalanced global trade relationship. While presented as a corrective measure, F&RP represents a brazen turn from multilateralism towards assertive bilateralism — swapping hard ‘reciprocity’ with prevailing trade norms. The policy is not just founded on equalizing foreign tariff rates but on wider considerations such as chronic bilateral trade imbalances.
Later, in his April 2 ‘Liberation Day’ speech, President Trump characterized the event as a ‘declaration of economic independence’, as he believes that the US had been ‘ripped off by every country in the world, friend and foe’, and the new tariffs were a means to reclaim economic sovereignty. Post this speech, sweeping tariffs, including a baseline 10% levy on all imports and higher rates for specific countries, were levied with effect from April 5. However, just 4 days later, most of the newly proposed tariffs were delayed for a 90-day moratorium to facilitate negotiations, which is soon to expire on July 8. Here onwards, this strategy of pressure-and-pause became a pattern.
The F&RP also proved to be a strategic lever designed to bring China to the negotiating table on long-standing tariff disputes. To that extent, the policy paid off, with President Trump meeting with Chinese Premier Li Qiang from May 9 to 12 in Geneva. This resulted in a global market surge after the US and China announced a 90-day mutual tariff rollback in their trade war, cutting the US tariffs on Chinese goods from 145% to 30% and subsequently reducing Chinese tariffs on US products from 125% to 10%. Still, whether the summit is actually a detour from Trump’s aggressive bilateralism or a tactical pause remains to be seen.
However, this new approach appears directly antithetical to the World Trade Organization (‘WTO’) model, and the Most-Favored-Nation (‘MFN’) principle in particular, which requires member countries to extend the lowest tariff rates to all other members.
The American Stance
According to the new US administration, The F&RP is a direct response to an alleged competitive disadvantage unfairly targeting American businesses. To understand this, one needs to look at the numbers. For instance, in the automotive sector, the European Union and China impose 10% and 15% tariffs on US cars, respectively, while the US applies a much lower tariff of only 2.5% on car imports to both. Similarly, the introduction of the 2% Digital Services Tax (DST) by the UK in the technology sector specifically targets large US-based tech companies, such as Google, Amazon, and Facebook. The disparity also extends to the pharmaceutical sector, where India places a 10% tariff on American products and imposes regulatory barriers that restrict market access, while the US generally applies low-to-zero tariffs on the same.
The international reaction to Trump’s tariff policy has been swift with the European Union, Canada and China imposing retaliatory tariffs. At the heart of this trade war is a broader concern: Are these measures compliant with the WTO framework, or is the system subtly manipulated to advance national agendas at the expense of its original purpose by exploiting the loopholes? If so, are we moving away from multilateralism which was the premise of this system? For answering this enquiry, this article examines the legal basis of the measure at issue and then comes to a concluding stance.
The Legality of the Measures at Issue
‘Reciprocal tariff’ refers to a policy in which a country imposes tariffs on imported goods at the same rate that another country applies to its exports. Essentially, reciprocity largely manifests in two forms – specific and diffuse.
In the context of multilateral trade agreements (such as the GATT), tariffs should generally align with the principle of diffuse reciprocity rather than specific reciprocity. “Diffuse reciprocity”, as Robert Keohane describes, works on a long-term commitment to cooperative norms, wherein the states offer concessions with the expectation that the system (as a whole) will ensure balanced benefits over time. This is unlike ‘specific reciprocity’, where equivalent treatment can be precisely measured and a direct exchange of equivalent concessions between two states can be achieved. In multilateral settings ‘diffuse reciprocity’ internalizes itself in the application of rules such
as MFN treatment and national treatment (‘NT’), under GATT Article I:1 and Article III:1, respectively. In practice, this internalization entails a system wherein countries do not just offer concessions to one another on a case-by-case basis (bilateral exchanges), instead, they agree to rules that promote fair treatment across the entire system (multilateral arrangements). For example, Country A and Country C are developed economies and trade openly under WTO rules. They extend MFN treatment (that is, lower tariffs) to developing Country B, despite B’s higher tariffs and limited access. A imports B’s agricultural goods and C imports raw materials, neither demanding immediate reciprocity. As B’s economy grows and liberalizes according to the same strengthened multilateral system, all three benefit through diffuse reciprocity.
On the contrary, the reciprocal tariffs do not seem to align with the diffuse reciprocity threshold, all while dispute settlement at the WTO is blocked due to the dysfunctional Appellate Body. This has emboldened the US to take further unilateral measures, such as its assertive use of Section 301 of the U.S. Trade Act of 1974, allowing the government to apply tariffs without WTO authorization if it believes a trade partner is adopting unfair trade practices. Following the same line, the Presidential Document (Federal Register/Vol. 90, No. 32), in Section 2, states that the US is considering the equivalent of a reciprocal tariff in relation to ‘each foreign trading partner’ suggesting that America will apply differential tariffs to diverse countries instead of applying equal rates, thus violating the MFN principle. Although the original policy of a default 10% reciprocal tariff made early headlines, the actual implementation of the framework is much more intricate. The United States Trade Representative has stated that tariff levels will not be determined simply by foreign tariffs, but by a matrix of considerations that includes bilateral trade balance, domestic content in goods, and even security considerations. Under this model, if a good sold to the United States has less than 20% of the product composed of US-origin components, it might be charged tariffs up to 26% of the total product value. But if US components are at least 20% of the value of the product, only the non-US component will face the default 10% duty. This tiered system is intended not as a simple act of retaliation, but to redirect global supply chains towards the US.
On paper, the US is bound to its tariff commitments under GATT Article II:1. Ideally, instead of imposing new tariffs unilaterally, the US should have renegotiated its bound tariffs through WTO channels. Not doing so violates Article II unless justified under exceptions such as national security (Article XXI) or safeguards (Article XIX), both of which we will now turn to.
The United States’ Application of Article XXI: Systemic Misuse of the National Security Exception?
Trump invoked national security grounds to raise tariffs in order to protect domestic industries. This use of ‘national security’, under Article XXI of GATT, as a ground for trade restriction appears questionable and legally suspect.
Under WTO jurisprudence, Article XXI allows WTO Members to take measures that would otherwise violate trade obligations if they are necessary to protect essential ‘security’ interests. This provision is not wholly self-judging. In the Russia–Traffic in Transit case , the WTO panel established clear prongs for assessing whether a measure genuinely qualifies under the ‘national security’ exception.
Firstly, whether an ‘emergency in international relations’ exists is an objective determination. This was clarified in US–Origin Marking (HK, China), where the panel noted that the term “refers to a state of affairs, of the utmost gravity, in effect a situation representing a breakdown or near-breakdown in the relations between states or other participants in international relations”. The threshold requires that the situation must be close to the ‘hard core’ meaning of war or armed conflict. A second interpretative approach rests on the ejusdem generis canon of treaty interpretation, as the general words ‘other emergency in international relations’ following specific term ‘war’ must be colored in the light of those specific words. Hence, a purely economic emergency, even if severe, lacks the international and relational character required by the clause, unless it stems from or results in a near-breakdown in relations between states.
Secondly, there must be a minimally plausible connection between the measure and the essential security interests. This remains suspect in the case at hand, as no ‘essential security interests’ are threatened in the first place.
Thirdly, the measure should not be a disguised means of economic protectionism. In the case at hand, protectionism is manifest: the US’ justification is based on concerns over global steel overcapacity, particularly from China. The fact of exemptions being negotiated for certain countries undermines the US’ own claim further. The broader ‘America First’ investment and trade doctrine reinforces this pattern.
Violations of Article XIX and the Safeguards Agreement
Article XIX of GATT and the Safeguards Agreement permit a temporary restriction of trade to prevent serious injury by unforeseen developments only under rigorous procedural requirements. Nevertheless, the United States imposed tariffs on varied sectors without formal justification under WTO law, thus exposing such actions to challenge as ‘disguised protectionism’. Similarly, notification compliance and consultation requirements were not met, for which India has recently taken the US to the Safeguards Committee for consultations.
Broader Violations of WTO Commitments
There are several similar concerns, such as under the Subsidies and Countervailing Measures (‘SCM’) Agreement, which requires objective evidence and formal investigation under Articles 10 and 11 before imposing countervailing measures. Further, under TRIMs Article 2.1 in conjunction with GATT Article III:4, WTO members may not impose investment measures contrary to national treatment obligations. The US has made some tariff concessions dependent on domestic material use, which may be contrary to TRIMs provisions.
All in all, even if one follows the US’ arguments, under Dispute Settlement Understanding (‘DSU’) Article 23 WTO members are obligated to resolve disputes through the WTO mechanism and not through unilateral action. The US’ stance of avoiding the multilateral approach to dispute settlement conflicts with this obligation.
Moving Away from Fair, Rules-Based Trade?
Trump vowed that his administration would square trade disparities through naked economic muscle rather than diplomacy. If major economies like the US persist in ignoring WTO law with impunity, there is a real risk that other trading partners such as China, the European Union, and India, may follow suit. This will undermine the legitimacy of the rules-based order and accelerate a slide toward splintered, interest-based trade blocs. To sum up, clearly the measures are non-compliant with the WTO Framework. Amidst the issues surrounding lack of clarity on the scope of national security exceptions under Article XXI, deadlock in the Appellate Body and doubts on enforcement mechanisms, the system inclines towards national agendas at the expense of its original purpose. This is a mark towards regionalism and a wider shift toward ‘unilateralism’—thereby risking decades of multilateral trade cooperation gains.
Poorva Sharma is an undergraduate student studying law at Dharmashastra National Law University, Jabalpur, India. Her research interests lie in the confluence of international law, international trade law, and legal theory.
Vasujit Dubey is an undergraduate student studying law at Dharmashastra National Law University, Jabalpur, India. His research interests lie in the confluence of international law, international trade law, and legal theory.