Free trade is not based on utility, but on justice — Edmund Burke
By ‘Femi D. Ojumu
Compelling national interests inform strategic policy decisions. Four scenarios illustrate that proposition. First, A’s fierce rival, B, outperforms A, on competitive labour costs, manufacturing efficiency, product innovation, quality, speed-to-market, and market share of fast-moving-consumer-goods in global trade. A, imposes punitive import tariffs against B. Examining the logic, is A’s action of imposing tariffs against B, a de facto admission of its inability to compete effectively with B? Yes!
Second, global trade is anchored upon variable degrees of capitalism, legality, supply and demand which, ordinarily, determine the prices of goods and services. Does the claim that X’s products are underperforming in various regional markets, without more, automatically suggest a transnational conspiracy against X? No!
Third, global trade and free markets are interwoven. However, in today’s world, riven by economic sabotage, mutual suspicion by rivals and allies; informational asymmetry, fierce competition for power, military domination, global pre-eminence, isolationism, and economic nationalism, are import tariffs here to stay? Likely.
Fourth, are the three preceding propositions mutually exclusive? No! Because, they intersect upon the basis of geopolitics and strategic priorities.
No discourse on the above is complete without an examination of extant US trade policy vis-à-vis the “weaponisation” of import tariffs as an instrument for resetting global trade in the country’s geopolitical and geoeconomic interests, under the ideological agency of “America First” which seeks: global pre-eminence! Practically, that means boosting US manufacturing, unorthodox policies to lure foreign businesses to the States, boosting the latter’s economic development, ditto draconian immigration policies. Weaponisation is used figuratively and implies a robust strategy to make others accede to a country’s ideological and policy choices. The deduction there instantly undermines the essence of sovereign autonomy and the equality of independent nations, which demeans international law.
For exactness, tariffs are import taxes on goods and services, utilised by sovereign nations, to govern international trade, recalibrate trade balances and forex flows, safeguard domestic industries, and to boost fiscal revenues. Although utilised in international trade policy, and applied to commodities, manufactured goods, raw materials, and services, they are typically sparingly deployed. The rationale is to enhance effective and equitable global trade, economic development, stability of transnational trade, and free markets.
Broadly, there are four main tariff regimes: 1) Revenue Tariffs, targeted at generating fiscal income for governments; 2) Protective Tariffs, which seek to safeguard domestic industries from foreign competition by escalating import costs; 3.) Discriminatory (Variable) Tariffs, which applies different criteria and preferential tax rates for different countries and products; and 4) Non-Discriminatory (Fixed) Tariffs; which adopts an all-things-to-all-people methodology because it applies a uniform tax rate to all countries for specific items.
Yet, geostrategic differences imperil even the most carefully crafted international commercial agreements given policy divergence amongst nations, which further compounds the calibrated application of tariffs by countries. Patently, lack of global coordination, and cooperation, spells disaster for transnational trade. Hence, the World Trade Organisation (WTO), established in 1995, oversees the modus operandi of transnational trade rules and concurrently enhances the trade capacity of developing countries.
It aims to enable members utilise transnational trade to catalyse employment, living standards, and human conditions. Whilst the WTO utilises the most favoured nation “MFN” model in that a concession granted to one country by another should be of universal application, two historical exceptions apply. The United States ideologically disapplies the MFN trade status to Cuba and North Korea.
Hitherto, the WTO absorbed the functions of the General Agreement on Tariffs and Trade (GATT), established pursuant to early discussions at the United Nations Conference on Trade and Employment, of 1947, in Havana, Cuba. It was eventually ratified on 30 October, 1947 in Switzerland. The GATT’s preamble established its objective as “substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis.”
Besides, GATT did not emanate from a tabula rasa. The template was Britain, which abolished tariffs on imported food and corn with the nullification of the Corn Laws in 1846. Britain’s pivotal shift towards free trade was a response to the Great Famine in Ireland and pressure from the Anti-Corn Law League. The League, led by Richard Cobden, advocated for free trade, arguing that cheap food would increase real wages and benefit the working class.
More recently across three important transcontinental regional blocs, the Economic Community of West African States (ECOWAS), established in 1975, aspires to advance economic integration among West African countries. Whilst substantial progress has been accomplished in tariff reduction across the bloc, however, some tariffs remain although the bloc seeks to eliminate them completely. Besides, ECOWAS implemented a common external tariff (CET) in 2015, which reduced tariffs on imported goods from outside the region.
The European Union comprising 27 member states, abolished tariffs, with limited exceptions, among its member states in 1993, establishing a single market with free movement of goods, services, and people. The underlining strategy sought to enhance economic integration and cooperation among member countries.
Whilst the North American Free Trade Agreement (NAFTA), established in 1994, eliminated most tariffs on trade between the United States, Canada, and Mexico; it calibrated phasing out restrictions on trade over a few years, allowing for the free movement of goods and services across borders.
Although NAFTA was significantly reviewed, it was scrapped on 30 June 2020, and replaced by the United States-Mexico-Canada Agreement (USMCA), on July 1, 2020, with the aspiration of promoting tariff-free trade among its member countries. Key differences between NAFTA and USMCA relate to agricultural produce, automobile manufacturing, digital trade, intellectual property rights, equitable labour standards et al. Importantly, USMCA has a tougher regime on the manufacturing origin of automobiles and imposes requirements for a greater proportion of elements to be manufactured in North America to benefit from tariff immunities.
A key inference from these blocs is that trade can facilitate not just economic development, the enhancement of living conditions, transnational cooperation, but crucially, friendship and international peace in a dystopian global order. Thus, trade yields tangible economic gains and intangible benefits of peaceful cooperation.
Nonetheless, there is an enduring tension between the imposition of tariffs, which, jurisdictionally, is a sovereignty substratum, versus global free trade, which is the aspiration of enlightened nations. The question then pivots on the emphasis a country places on tariffs as a strategic instrument for economic growth and ideological leverage or global free trade and its positive multiplier effects. The answer defies exactitude and is guided by strategic interests. Countries therefore impose an admixture of tariffs as those interests demand.
Over the last 50 years, transnational trade has oscillated between liberalization and protectionism. The 1970s and 1990s highlighted significant trade liberalization where the United States and other industrialised nations, reduced tariffs on manufactured goods, which catalysed global trade. Likewise, the Tokyo Round (1973-1979) and Uruguay Round (1986-1994) of the General Agreement on Tariffs and Trade (GATT), yielded major tariff reductions.
Globalisation, and trade deficits in the industrialised countries through the 2000s and 2020s witnessed the resurgence of protectionism with the US Biden Administration (2021-2025) increasing tariffs on solar cells, lithium-ion batteries, steel, aluminium, and medical equipment from China. Japan, Korea, and Taiwan have also used tariffs to advance industrial development and growth.
Globally, tariff rates have remained relatively stable, with a weighted mean applied tariff of 2.59% in 2017, down from 3.06% in 2015, 3.50% in 2005, and 6.44% in 1995. Through the 2020s thus far, regional tariffs have averaged 5.93% in South Asia; 5.67% in Sub-Saharan Africa; 3.52% across Latin America & Caribbean; and 1.96% in the European Union. According to the WTO, global trade volume today is roughly 44 times the level recorded in the early days of the GATT (4400% growth from 1950 to 2023). Plus, world trade values today have ballooned by almost 370 times from 1950 levels. The world’s current MFN applied tariffs stand at an average of 9%.
Yet, the contested orthodoxy of global trade has been blown apart by the radical hikes in US tariffs imposed by the Trump Administration. On February 1, 2025, it introduced a 25% tariff on imports from Canada, and Mexico (strangulating USMCA!), and an additional tariff of 10% on imports from China, effective February 4, 2025. 24 hours before, on February 3, the Administration imposed a temporary moratorium on those tariffs. On February 27, 2025, the Administration reaffirmed the tariff imposition on the trifecta on Canada, Mexico, and China. The Administration went further in the most significant upturn of global trade since the end of World War II (1939-1945); by announcing a minimum 10% import tariffs on all goods entering the United States, on April 2, 2025, effective April 5, 2025 to tackle what was described as a “large and persistent trade deficit.”
Higher variable tariffs were imposed against 57 developed and developing economies like China (54% rate post April 9, 2025), European Union 20%, Lesotho 50%, Nigeria 14%, South Africa 30%, South Korea 25%, UK 10%, Vietnam 46% etc. Predictably, and in demonstrable execution of their sovereign autonomy, retaliatory sanctions against the US have followed or are envisaged. On 4 April 2025, China announced 34% tariff against the US, and has threatened to escalate the trade war by imposing higher tariffs on rare earth minerals used for top-end computer chips and electric vehicle batteries, whilst accusing the US of “typical unilateralism, and protectionism, and economic bullying” The EU is preparing “proportionate” retaliatory tariffs against the US. The Canadian government is also retaliating by imposing 25% tariffs on US-made vehicles, and apply to C$35.6 billion (€22.9bn) worth of imports, atop previous retaliatory tariffs that it had imposed on approximately C$60 billion (€38.2bn) worth of US imports.
Finally, the optics are clearly ominous for global free trade and have begun impacting stock markets, like the FTSE100, the Dow Jones Industrial Average and S&P. Tokyo’s 225 Index lost circa 9% on 7 April 2025. Markets thrive on confidence and uncertainty activated by the US tariffs globally may well initiate a global recession, not least with fragmented global supply chains, accentuated tit-for-tit tariffs, significant job losses, increased illegal migration to richer countries, unpredictability and cost inflation. The debacle will produce two key outcomes neither of which are risk free for the US.
First, is that the US succeeds in imposing transnational-tariffs and rests global trade policy. The disbenefit is that America is perceived as an unreliable trading partner which resorts to unorthodox practices to get its way, whilst heightening the spectre of dumping.
Second, is that other countries, flock to “a coalition of willing” countries to trade transparently on the basis of comparative advantage, specialisation, and division of labour, under the agency of WTO rules. Deductively, the US risks isolation, haemorrhaging moral-leadership, and inescapable reputational damage. A trade war will harm the US economy as much it would harm other industrialised countries. It could catalyse developing countries’ local capacity, thereby stimulating enterprise innovation, broaden regional, bilateral/multilateral-trade, plus new export markets. The unintended policy outcome is that China champions a coalition of willing global free trade partners to America’s chagrin.
The concourse of belligerent protectionist ideology and sovereign economic pragmatism demands rationality, analysis, and de-escalation!
Ojumu is the Founder/Principal Partner at Balliol Myers LP, a firm of legal practitioners and strategy consultants in Lagos, Nigeria, and authored the internationally acclaimed Dynamic Intersections of Economics, Foreign Relations, Jurisprudence and National Development (2023).
