The 'weaponization' of trade policies by major powers like the United States and China is spreading globally, threatening fair trade. Citing examples such as U.S. tariff threats under President Trump and China's rare earth export restrictions, economist Motoshige Itoh argues for restoring the World Trade Organization's role to counter beggar-thy-neighbor tactics.
A phenomenon called the 'weaponization' of trade policy is spreading around the world. The administration of U.S. President Donald Trump has used threats of higher import tariffs to extract concessions from foreign countries, leveraging their fear of losing access to the vast U.S. market. Japan, aiming to protect its key auto export market, engaged in tough negotiations and ultimately agreed to boost investments in the United States, allowing the U.S. to profit from trade as a weapon.
China employs similar tactics, restricting rare earth exports—known as the 'vitamins of industry'—to gain leverage in talks. With a dominant global share in production, China threatened these curbs against Japan in 2010 amid the Senkaku Islands dispute. A halt in shipments could immediately disrupt U.S. manufacturing. Globalization has deepened countries' reliance on cross-border trade, heightening vulnerability to such export and import barriers.
The World Trade Organization (WTO) was founded to curb unilateral restrictions, fostering global trade growth when effective. Yet globalization's irony lies in enabling major powers to weaponize policies. The 'optimal tariffs' theory explains how large economies can manipulate trade prices via import curbs. For instance, the U.S. initially planned a 27.5% tariff on Japanese cars, later reduced to 15% through talks. Japanese makers cut export prices to keep U.S. sticker prices stable, absorbing part of the cost and boosting U.S. tariff revenues. Trump even proposed distributing $2,000 per American from these funds.
Low tariffs suit small nations best, but major powers are tempted by beggar-thy-neighbor approaches—gaining at others' expense, as seen in Trump's tariffs and China's subsidies distorting competition. The WTO has historically prevented this, with the U.S. once leading its efforts, but the Trump era undermined it. While weaponization yields short-term gains, it stifles long-term prosperity. Rebuilding a free and fair trade system, including revitalizing the WTO, is essential.
Motoshige Itoh is a professor emeritus at the University of Tokyo and served as a professor at Gakushuin University's Faculty of International Social Sciences until March 2022.
