US Again "Shakes" WTO, China "Harvests" Trade Disputes

Amid the increasing prevalence of trade wars, the United States has once again shaken the World Trade Organization or WTO. Under Donald Trump's second term of leadership, the U.S. is indicated to have suspended funding for the WTO.

On the other hand, China, which has become the arch-enemy of the US in the tariff war, is "reaping" hundreds of trade investigations. Nearly half of those trade investigations are being disputed at the WTO.

Reuters reported that the US has temporarily delayed funding payments to the WTO in 2024 and 2025. In 2024, the WTO's budget amounts to 205 million Swiss francs or approximately 232.06 million US dollars. The US contribution to that budget is 11 percent.

The report is based on three Reuters sources following the WTO's budget meeting on March 4, 2025. The three sources requested anonymity because the budget meeting was closed-door, and the U.S. has not officially announced the cessation of funding for the WTO.

WTO funding payments in 2024 and 2025 are on hold pending a US budget review.

Two sources who directly attended the meeting stated that the U.S. delegation conveyed that funding payments for the WTO in 2024 and 2025 would be postponed pending a review of the U.S. budget. Washington will inform the WTO of the results on an unspecified date.

A third source confirmed this, saying the WTO would have a "Plan B" in case of a prolonged funding freeze (Reuters, 3/28/2025).

If the US truly halts the funding, the WTO might slow down or streamline part of its expenditures. In fact, the WTO is currently handling various trade dispute complaints, including issues regarding the US's increased import tariffs on several products from Canada and China.

This condition has the potential to further blunt the role of the WTO as the guardian of the global multilateral trading system. This is in light of the fact that during his first term of leadership, Trump blocked the appointment of judges to the WTO Appellate Body (AB) in 2019. That policy has continued under the era of Joe Biden.

To date, the WTO AB is still not fully functional. As of December 2024, there were 31 pending appeals. To address this, the WTO is attempting to resolve trade disputes at the Dispute Settlement Body (DSB) level. Around 15 member countries have also used alternative appeal mechanisms outside the WTO.

The plan to temporarily suspend funding for the WTO is closely related to Trump's "America First" policy. Previously, in January 2025, the US withdrew from the World Health Organization (WHO) and the UN Commission on Human Rights. The US even no longer funds global development through the US Agency for International Development (USAID).

Meanwhile, China, the main rival of the US trade war, was the subject of 198 trade investigations launched by its trading partners throughout 2024. This is the impact of the flood of Chinese export products at more affordable prices in the international market.

According to Statista data, China's total export value in 2024 will reach 3.58 trillion US dollars, growing 5.9 percent annually. China's trade surplus with various countries in the world even reached a record close to 1 trillion US dollars.

China was the subject of 198 trade investigations launched by its trading partners throughout 2024 over allegations of dumping and illegal subsidies.

Peking University researcher and economist Lu Feng said that the 198 trade investigations against China throughout 2024 were dominated by cases of alleged dumping and illegal subsidies. The number of investigations has doubled compared to 2023.

Lufeng even pointed out that half of the investigation cases were disputed at the WTO. A total of 117 trade investigations were conducted by developing countries, including India (37 cases), Brazil (19 cases), and Turkey (9 cases).

China is banking on surging exports to sustain national economic growth, offsetting weakening domestic demand amid a years-long property slowdown (Financial Times, 31/3/2025).

Weak domestic demand amid trade barriers from several countries, including the US and the European Union (EU), has caused Chinese industries to experience overproduction. It is not surprising that China is selling its products cheaply to other trading partners.

The United Nations Conference on Trade and Development (UNCTAD) warns that in 2024, the global trade imbalance will return to the same level as in 2022. Trade wars and geopolitical tensions are the triggers.

UNCTAD cited an example, in the fourth quarter of 2024, the US trade deficit with China increased by 14 billion US dollars to 355 billion US dollars. Likewise, the EU, its trade deficit with China increased by 12 billion US dollars to 241 billion US dollars.

Throughout 2024, the EU Commission has even launched 21 trade investigations into a number of Chinese products. Some of these are products that have seen significant increases over the past nine years, namely cylindrical steel, plywood, wax, and decorative paper.

The US funding cutoff for the WTO is just a matter of time before it is officially announced. After reclaiming the US throne, Trump is not expected to unblock the appointment of WTO AB judges.

The potential weakening of the WTO due to US policy will have an impact on the multilateral trading system and the resolution of trade disputes. Moreover, on April 2, 2025, the US will increase import duties on 15 countries that enjoy a trade surplus with the US (Dirty 15).

The Office of the US Trade Representative (USTR) said the 15 countries will be selected from 21 countries that control 88 percent of total trade with the US. The countries in question include Argentina, Australia, Brazil, Canada, China, the EU, Indonesia, India, Japan, South Korea, Malaysia, Mexico, Russia, Saudi Arabia, South Africa, Switzerland, Taiwan, Thailand, Turkey, the UK, and Vietnam.

The US Bureau of Statistics shows that Indonesia is ranked 15th on the Dirty 15 list. In 2024, Indonesia enjoyed a trade surplus of 19 billion US dollars with the US. Indonesian commodities contributing to the surplus include mineral fuels, vegetable fats and oils, apparel, footwear, cocoa, and furniture and crafts.

When the US really targets Indonesia, then Indonesia reports the US policy to the WTO, the resolution of the trade dispute will take a long time. In the middle of the dispute resolution process, Indonesian products entering the US market have already been hit by tariff increases.

But on the other hand, Indonesia can be said to have gained a little advantage. The WTO AB which is not yet fully functioning will delay the final decision on the Indonesia-EU nickel ore export and downstreaming dispute.

In 2022, Indonesia lost against the EU which sued the ban on Indonesian nickel ore exports at the WTO DSB. Indonesia considered the decision not yet legally binding so there was still a chance to appeal to the WTO AB.

Amid the nervous anticipation of the announcement of the increase in Dirty 15 tariffs from the US, Indonesia also needs to pay attention to the surge in imports of products from China. In 2024, Indonesia will experience a trade deficit with China of 10.3 billion US dollars or a 49.22 percent drop compared to 2023 which had a surplus of 2.05 billion US dollars.

If left as is, Indonesia's trade deficit with China has the potential to widen further.

The trade deficit against China is Indonesia's worst achievement since 2020. At that time, Indonesia's trade deficit against the country reached 7.85 billion US dollars. The deficit value in that year was significantly reduced from the deficit values in 2018 and 2019, which were 18.4 billion US dollars and 16.97 billion US dollars, respectively.

The data indicates that Indonesia's trade balance with China is starting to reverse direction from a deficit reduction to a surplus to a deficit again. If left alone, Indonesia's trade deficit with China has the potential to widen even further.

Are policymakers in Indonesia able to overcome or at least dampen the US and China trade “attacks” this year and in the future? Especially considering that the two countries are Indonesia’s largest trading partners and the WTO is still “sluggish”.