The Costs of Ignoring WTO Law

International law may be outdated, facing new challenges. Unilateral policies may spearhead new developments, calling for further developments of international law disciplines in multilateral, plurilateral and bilateral agreements. Most of the time, however, countries comply with existing rules considering mutual interests. Or they engage in consultations and dispute settlement, clarifying and further refining the common law of international trade regulation.

The United States trade policy following the “Liberation Day” of April 1, 2025, is a complete outlier to this pattern. The unilateral tariffs imposed on countries defied basic obligations of MFN and tariff bindings. The balance of payment considerations put forward completely ignored services which today drive advanced economies in the age of electronic communication. The policy came with high costs. Exporting companies lost business security with weekly shifting framework conditions, at the detriment of investment and jobs. Consumers and companies were taxed, ignoring the principles “no taxation without representation”. Congress was not involved in defining these policies.

In the landmark decision Learning Resources, Inc., et al., v. Trump, President of the United States the US Supreme Court ruled most of these tariffs illegal.[1] The ruling barred extensive use of emergency powers in tariff policy. But reclaiming unlawfully collected tariffs will be arduous and difficult. It will require review in legislation of domestic tax breaks funded by fiscal tariff income. Or high indebtment of the federal government will further increase, facing the resistance of financial markets. 

The damage is done. Other countries and the EU contributed to it. Few were able and willing to resist. Most appeased the United States and defied their rights under the WTO. They agreed to enter into trade deals violating WTO law and undermining the authority of the rule of law. WTO law remained silent. As trade deals cannot be enforced and are subject to additional tariffs and measures unilaterally imposed by the United States, these countries essentially lost their sovereignty in trade policy in relations with the United States of America. No concerted efforts were made to challenge US trade policy in the WTO and to tell world. These countries underestimated the importance of the law, considering path dependencies on the US in security and the war of Russia against Ukraine. Countries went on their own, beggaring their neighbours in search of minimising harm to their export industries and economy.

“Liberation Day” policies will go down in history as the most prominent real-life experiment in defying international trade law. It is likely to result in failing to achieve major goals of creating many blue colour jobs by reindustrialization and by attracting additional investment in the US which foreign companies did not plan to undertake anyway. The experiment also demonstrates that legal protection is not adequate. The US courts were limited to assess the authority of the President in US constitutional law. No arguments on international law were considered by the Supreme Court.  Again, WTO law remained silent. Congress, in adopting the Uruguay Round Implementation Act in 1994, essentially barred courts of law from giving direct effect to WTO law. This policy has backfired and was not able to avoid major failures of governance in time.

What can be done?

Trade policy goals of the US can and should be pursued within the framework of WTO law. Sectorial goals can be pursued by tariff deconsolidation, subject to compensation. The US can invoke trade remedies and essential security interests. It can ask for waivers. There is ample flexibility within the multilateral system. But current challenges and needs also call for reform of legal disciplines, in particular in the field of industrial policies and subsidies. This is not only due to reshaping value chains for reasons of security in geopolitics, but also in response the challenges of climate change.

The United States Supreme Court confines trade policies to existing instruments in US trade law. Most of these remedies are limited in time or depend on specific investigations, sector by sector, country by country. They essentially exclude “Liberation Day” policies. Companies and importers will be able to challenge excessive measures ultra vires before US Courts. These legal battles will be prolonged and will not prevent the President from decreeing unlawful tariffs in coming months. In assessing tariffs, US courts should be enabled to review compatibility not only with domestic law, but also international law. Lessons should be learned and the Uruguay Round Implementation Act restrictions on direct effect should be lifted. At least, courts of law should effectively apply the doctrine of consistent interpretation (Charmey Betsy doctrine), requiring that domestic law is construed as far as possible in line with international law.[2] Companies and citizens will see the benefits. This doctrine is well established in the EU and other countries should follow suit.  

The major lesson of “Liberation Day” tariff policy is that WTO essentially depends upon enforcement in domestic law. International law and domestic law must be considered in tandem. WTO law, as all of international law is not a self-contained system but part of multilevel governance. The silence of WTO law must end. To this effect, members of WTO must challenge US measures taken before the WTO and expose potential illegalities under WTO agreements. Whenever possible should be done in a broad collation of countries supporting the rule of law, and willing to regain their sovereignty in dealing with the United States of America.

Often, we only realise the value of something once it is lost. “Liberation Day” policies recall the importance of the rule of law, predictability and stable framework conditions to enhance welfare, create jobs and reduce poverty. This is the very foundation upon which the next WTO Ministerial Conference in 2026 (MC 14) should engage in reform of the WTO and lay the groundwork.

The lessons of “Liberation Day” tariffs encourage countries to move forward. It encourages members to review and qualify the consensus rule, and to open WTO to plurilateral agreements and new alliances. It encourages to open dispute settlement to these and bilateral agreements, making best use of the expertise of the WTO secretariat in Geneva, working on the common law of international trade. It encourages to link WTO dispute settlement to obligations of enforcement in domestic law. It encourages members to review the mantra of a purely member driven organisation and become more inclusive for NGOs and other international organisations, in particular those in town. It will encourage members to take up reform of substantive rules to cope with the challenges of climate change mitigation in energy law and of adaption in agricultural policies. This is not the time for despair. We must analyse the causes of populist trade policies and intellectually prepare a new post-War and post-Trump era, drawing the lessons from “Liberation Day” policies, their motivations and failures. Today, this is a task for NGOs and academic institutions. Tomorrow it is for governments and future trade negotiations to act.

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[1]            697 U.S. ____ (2026).

[2]            Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64 (1804).