What Happened
- A WTO analysis found that countries which concluded bilateral trade "framework agreements" with the Trump administration — including the UK, EU, Japan, South Korea, Indonesia, Vietnam, the Philippines, Cambodia, and Malaysia — are still subject to a baseline 10% tariff on their exports to the United States.
- The 10% tariff, imposed under Section 122 of the Trade Act of 1974 after the Supreme Court struck down IEEPA tariffs on February 20, 2026, applies to approximately $1.2 trillion (34%) of annual US imports and covers nearly all trading partners regardless of bilateral deal status.
- The bilateral "framework agreements" negotiated in 2025 were premised on the leverage of IEEPA tariffs (which the Supreme Court invalidated); the 10% Section 122 tariff now applies on top of existing MFN (Most Favoured Nation) rates under WTO rules.
- Countries that had secured preferential terms under bilateral deals found those advantages largely nullified, as the Section 122 tariff is a global surcharge not exempted by bilateral negotiations.
- The WTO assessment underscores the legal uncertainty facing US trading partners and the weakening of the multilateral rules-based trading order.
Static Topic Bridges
WTO Most Favoured Nation (MFN) Principle and Non-Discrimination
The Most Favoured Nation (MFN) principle is a foundational pillar of the World Trade Organization's trade regime, enshrined in Article I of the General Agreement on Tariffs and Trade (GATT). Under MFN, a WTO member that grants a trade concession (lower tariff, market access) to one member must extend the same concession to all other WTO members. Exceptions exist for Free Trade Agreements (FTAs) and Customs Unions under Article XXIV of GATT, and for developing countries under the Generalised System of Preferences (GSP). The US imposition of blanket 10% tariffs on most partners — regardless of bilateral deals — raises MFN compliance concerns.
- MFN principle: GATT Article I (1947), incorporated into WTO Agreement (1994)
- Key exceptions: GATT Article XXIV (FTAs, Customs Unions), GATT Article XVIII-B (balance-of-payments), Enabling Clause (for GSP/developing countries)
- WTO members: 166 countries as of 2024
- WTO Appellate Body: paralysed since December 2019 (US blocking new judge appointments)
- India's concern: US tariffs on India (including steel/aluminium under Section 232 and now Section 122) are ongoing; India has filed WTO dispute cases against US tariffs
Connection to this news: The 10% Section 122 tariff on countries that have "deals" with the US undermines the MFN principle — partners with bilateral agreements receive no better treatment than those without, eroding confidence in the US as a reliable trade partner.
US Trade Architecture: Key Statutory Instruments
US trade policy relies on several statutory instruments that grant the executive different scopes of authority. The Supreme Court's February 2026 ruling struck down tariffs under IEEPA (1977). The administration then pivoted to Section 122 of the Trade Act of 1974 (balance-of-payments authority) while continuing to use Section 232 of the Trade Expansion Act of 1962 (national security) and Section 301 of the Trade Act of 1974 (unfair trade practices) for sector-specific tariffs.
- IEEPA (1977): struck down by SCOTUS Feb 20, 2026 — cannot be used for tariffs
- Section 122, Trade Act 1974: 10% global surcharge; limited to 150 days without Congressional extension; requires WTO balance-of-payments notification
- Section 232, Trade Expansion Act 1962: national security tariffs; steel (25%) and aluminium (10%) remain in force
- Section 301, Trade Act 1974: unfair trade practices; China-specific tariffs remain (25-100%+ on various goods)
- Trade Agreements: US bilateral FTAs include deals with South Korea (KORUS), Canada-Mexico (USMCA), and others — all now under legal uncertainty due to IEEPA deal nullification
Connection to this news: Countries that negotiated "deals" to escape IEEPA tariffs now face the Section 122 global surcharge anyway, demonstrating how the patchwork of US trade law creates unpredictability for partners — a key WTO concern about the erosion of rules-based multilateralism.
WTO Dispute Settlement and the Crisis of Multilateralism
The WTO Dispute Settlement Understanding (DSU) provides a binding two-stage process: panel rulings followed by Appellate Body review. Since December 2019, the Appellate Body has been non-functional because the US has blocked appointment of new judges, rendering WTO trade dispute adjudication incomplete. While panels can still issue first-stage rulings, without an Appellate Body, a losing party can "appeal into the void" — filing an appeal that cannot be heard — effectively blocking enforcement. This has been a systemic crisis for the rules-based multilateral trading order.
- WTO established: January 1, 1995 (successor to GATT, which started 1947)
- Headquarters: Geneva, Switzerland
- DSU: 60-day consultation → 6-9 month panel → Appellate Body review (max 90 days)
- Appellate Body non-functional: since December 2019 (US blocking)
- Alternative: 27 WTO members (including EU, Canada, India) set up the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) in 2020 as a temporary workaround
- India's DSU cases filed against US: multiple, including on steel and aluminium Section 232 tariffs
Connection to this news: The WTO analysis of the 10% tariff applying to bilateral-deal partners highlights the failure of multilateral mechanisms to constrain unilateral US trade measures — precisely because the dispute settlement system the WTO depends on is broken.
Key Facts & Data
- Section 122 tariff: 10% global surcharge effective February 24, 2026; covers ~$1.2 trillion in US annual imports
- Section 122 maximum: 15% surcharge; 150-day limit without Congressional extension
- Countries with bilateral "deals" still facing 10%: UK, EU, Japan, South Korea, Indonesia, Vietnam, Philippines, Cambodia, Malaysia
- WTO membership: 166 countries
- WTO Appellate Body: non-functional since December 2019
- MPIA: 27-member interim arbitration arrangement (EU, India, Canada, others)
- Steel (Section 232): 25% tariff — still in force
- Aluminium (Section 232): 10% tariff — still in force
- China (Section 301): 25–100%+ tariffs — still in force