Reciprocal tariffs imposed by the United States violate World Trade Organization (WTO) rules and undermine both the country's domestic economy and the global economy at large, said Philippe Monnier, former executive director of the Greater Geneva Berne Area Economic Development Agency, during an interview Friday.
Amid widespread opposition, U.S. President Donald Trump on Wednesday signed an executive order on so-called reciprocal tariffs, imposing a 10-percent minimum baseline tariff and higher rates on certain trading partners.
Highlighting the principles of the WTO, Monnier emphasized the importance of adhering to established mechanisms for resolving trade disputes instead of resorting to unilateral actions.
"Based on the WTO rules, you have to follow the most-favored-nation principle and it is not the same as reciprocal tariffs. The other thing is that if you have some disagreement, you should not take some unilateral decision. There are some specific dispute mechanisms, and you have to use those mechanisms if you disagree," he said.
The economist warned of the far-reaching negative consequences of imposing high tariffs, citing historical examples and the potential disruptions to global trade and economic growth.
"You will find a lot of negative consequences. First, you will see there will be higher prices. Of course, there will be retaliation from most countries, and it will be the start of a trade war. And then the global chain will be disrupted. It will be very complicated to buy components including, for instance, components from Germany that you import to manufacture American cars. Eventually you we will have a very bad allocation of assets. In history, there are a lot of examples of countries which tried to protect themselves with very high tariffs. But eventually those countries had a very negative economic growth. And I think that this will not only impact the USA, it will impact every country. But probably even more the USA than other countries because they will have less competition and they will start to make things that other countries can do better than themselves, including of course China," he said.
Monnier stressed the potential global trade shifts that could arise from U.S. isolationism, predicting closer economic cooperation between Europe and China as countries seek alternative partnerships.
"If the USA starts to be more and more isolated, naturally, the trading partners will start to find new trading partners. And China and Europe will have an incentive to cooperate more. Maybe there will be a sort of free trade agreement between China and the European Union. We already have one between Switzerland and China, but it could be expanded to the European Union. So yes, definitely it will encourage new trading routes. Certainly, Europe cannot export as much as before to the USA. They will try to find other solutions and definitely China is one of them," he said.
US reciprocal tariffs violate WTO rules, pile stress on global economy: expert
US reciprocal tariffs risk WTO rule violation, global economic fallout: expert
