PM Wong on the 3 implications US tariffs have on the global trading system

Move rejects WTO rules, risks full-blown trade war, signals rising 'me first' mindset

- Wong Pei Ting

The sweeping tariffs imposed by US President Donald Trump on countries around the world have consequences that extend far beyond economics, even as business and consumer confidence has already taken a hit.

Prime Minister Lawrence Wong told Parliament on April 8 that while the tariffs themselves are already damaging, this new wave of protectionism is unpredictable and unstable, with businesses likely to hold back on investments.

"Protectionism is already bad; unstable protectionism is even worse," he said.

"All this creates an environment of deep uncertainty—one that could tip both the US and global economy into recession," he added.

PM Wong said the tariffs have three wider implications for the global trading system and the world economy.

'RECIPROCAL' TARIFFS A FUNDAMENTAL REJECTION OF WTO RULES

The US' new tariff regime is a complete repudiation of the Most Favoured Nation (MFN) principle, one of the cornerstones of the World Trade Organisation's (WTO) multilateral trading system, said PM Wong.

Laying out why the MFN is important, he said the principle might sound like it gives certain nations special privileges, but it is in fact the opposite—every member must treat all other members equally.

In other words, if a country extends more favourable terms or imposes additional restrictions on one trading partner, it must do the same to all other WTO members, PM Wong stated.

"(The tariffs) open the door to selective country-by-country trade relationships, based on unilateral preferences," he said.

While he noted that there are some carve-outs and exceptions to the MFN rule, for example, to allow free trade agreements, the MFN principle has long been the bedrock of the multilateral trading system, PM Wong said.