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The U.S. has suspended its contributions to the World Trade Organization (WTO) as a part of the federal government’s cost-cutting measures, putting the nation’s membership to the preeminent body for regulating international trade on perilous footing.
While the White House has not commented publicly on the decision, the move is in line with the Trump administration’s stated plans to remove the U.S. from global institutions like the World Health Organization (WHO) as a part of its “America First” agenda.
Reuters reported Thursday that a U.S. delegate announced at a WTO budget meeting earlier this month that the country’s budgets were on hold pending a review of contributions to such organizations. The WTO, which connects 166 countries that account for 98 percent of world trade, aims to help nations ensure fair and equitable negotiations for trade agreements and the lowering of trade barriers.
With a yearly budget of 205 million Swiss francs ($232.06 million) in 2024, the U.S. was expected to contribute around 11 percent. But a document marked “Restricted,” which was viewed by the news outlet, said that the U.S. had arrears, or unpaid dues, of about $25.7 million at the end of December.
EU and Canada in the crosshairs
The news comes as the clock ticks ever closer to April 2, which President Donald Trump has deemed “Liberation Day” for the U.S. The Commander in Chief is slated to announce new tariffs on goods from across the globe, though in recent days, he’s indicated that he may pull back on aggressive “reciprocal” duties by limiting their scope and targeting only certain nations with more egregious trade imbalances with the U.S.
The European Union and Canada are still in Trump’s sights, however. On Wednesday evening, he warned that any joint retaliatory response to the impending duties would result in harsher action from the U.S.
“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had!” he wrote on Truth Social.
Trump also said Wednesday that he plans to implement a 25-percent duties on automobiles and car parts imported into the U.S. on April 2, a move that he said would “spur growth like you haven’t seen before.” Cars imported into the U.S through the U.S.-Mexico-Canada Agreement (USMCA) will see their foreign-made parts taxed at the new rate.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth,” Trump said from the Oval Office. Earlier this month, the president granted American automakers a reprieve by fully exempting automobiles from Mexico and Canada from the 25-percent duties on both countries announced in February. Those duties will take effect next week unless Trump opts again to defer them or reaches a deal with the other countries’ heads of state.
Canadian Prime Minister Mark Carney, who is running a breakneck campaign in advance of an April 28 election, said Thursday that Canada won’t be caving to Trump’s threats. “I take note of the president’s comment. I don’t take direction from it.”
The Liberal Party leader is polling ahead of Conservative Party nominee Pierre Poilievre by single digits in a number of the country’s recent polls. Poilievre’s chances have been recently hurt by a perception that he’s aligned himself with the American president.
“The President of the United States is trying to fundamentally restructure his economy. That means our economy, and it means the global economy as well,” Carney said at a press conference Thursday. “With time it will become apparent that these actions will end up hurting American workers and American consumers.”
Carney said Canada would “fight the U.S. tariffs with retaliatory trade actions of our own,” adding to the $60 billion in duties the country has already imposed on U.S.-made goods like whiskey, computers, servers, sporting equipment and more.
The government is also focused on strengthening trade relationships with allies and breaking down internal trade barriers. Within his first week, Carney pushed for all provinces and territories to remove all exemptions under the Canada Free Trade Agreement, and a federal fund was created to provide capital for new transportation networks.
All of these efforts aim to “dramatically reduce” Canada’s reliance on the U.S. market, he said. Approximately 77 percent of Canadian exports are exported to the U.S., amounting to about $2.7 billion worth of goods and services, according to Canadian government data.
“The old relationship we had with the United States based on deepening integration of our economies and tight security and military cooperations is over,” Carney said.
Retail feels the burn
As global superpowers mull their responses to the proposed duties, the retail sector is already feeling the impacts of Trump’s tariff maelstrom.
Following an earnings call Thursday in which the company posted softer than expected first quarter sales, H&M CEO Daniel Ervér told Sourcing Journal sister publication WWD that the retailer plans to tweak its sourcing strategy to account for the added tariffs on China-made goods. “China is a very important sourcing market, together with Bangladesh, Turkey and Vietnam,” he said.
The executive also said duties will likely force the fast-fashion giant to raise retail prices, and consumers will ultimately bear the brunt of the trade wars. “We are firm believers in global trade on fair and equal terms, and tariffs are not supporting global trade and global trade development,” Ervér told Reuters.
Last week, Academy Sports + Outdoors CEO Steve Lawrence told analysts that the company saw a net decline in sales and faces gross margin pressure, in part due to the tariffs. “Our first step when we saw these tariffs come across is work with our factory partners and see if they’ll absorb some of that,” he said.
“I think were in the past, maybe we thought having less exposure to China was the answer,” he added, noting that the company has been decreasing sourcing from the region in recent months, taking it from 10 percent of its portfolio to about 8 percent since the previous quarter. “I think having a diversified base is probably ultimately going to be the better answer because you never know who is going to get hit with the next round of tariffs.”
