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Summary
Multilateral trade is facing its toughest phase since the formation of the WTO, as Western nations increasingly resort to protectionist measures to shield domestic producers. Recent actions by the EU, the US, and Mexico highlight a growing trend that disproportionately impacts Asian economies, especially India and its neighbours, raising serious concerns about the future of global agricultural trade.
Multilateral System Faces Unprecedented Pressure
Multilateral trade has rarely been under such strain. The silence of the World Trade Organisation has become increasingly noticeable as a series of recent policy decisions disrupt the rules-based global trading system.
Multilateral trade challenges are most visible in agricultural commodities, where emerging Asian economies find themselves at the receiving end of new tariffs, safeguards, and accusations of dumping.
Asia Bears the Brunt of Trade Actions
Asia has been directly impacted by three major developments over the past two weeks:
Asia’s rice exports are under threat as the European Union prepares a safeguard mechanism to regulate imports from India, Pakistan, Cambodia, Myanmar, Vietnam, and Thailand. Among these, Vietnam and Thailand may be less affected.
Asia also faces pressure from the United States, which has accused India of dumping rice. President Donald Trump has warned of further tariffs on Indian rice imports.
Asia’s challenges deepened when Mexico imposed tariffs on imports from India and other countries, a move widely viewed as an attempt to appease the US during its own trade negotiations.
Protectionism Drives EU and US Decisions
Protectionism is the common thread linking these actions.
Protectionism in the EU is officially justified as safeguarding farmers and millers. However, data suggests the move primarily protects a small group of rice millers, rather than farmers at large.
Protectionism in the US appears aimed at supporting domestic rice farmers grappling with multi-year low prices. By targeting competitively priced Indian rice, Washington may be attempting to lift global prices while generating tariff revenue to fund rising farm subsidies.
Protectionism also has political underpinnings. Trump’s actions are seen as efforts to regain Republican support in key rice-growing states, especially after the approval of a $12 billion farmer payout package.
Tariffs May Hurt Consumers More Than Exporters
Tariffs on Indian rice may not deliver the intended results.
Tariffs could make basmati rice significantly more expensive for US consumers, raising questions about how long households will tolerate higher food prices.
Tariffs are unlikely to severely hurt Indian exporters, as the US is only the fourth-largest importer of basmati rice and the 24th-largest consumer of Indian non-basmati rice.
Tariffs imposed by Mexico, while limited in direct impact, set a concerning precedent for other countries negotiating trade agreements with the US.
Markets Drift Away From Multilateralism
Markets are increasingly shaped by national insecurity rather than global cooperation. Western economies are not alone in protecting domestic interests. Even China has demonstrated its willingness to curb exports or imports to safeguard strategic sectors.
Markets for agricultural commodities are therefore becoming more fragmented, undermining the very principles of multilateral trade.
Outlook for Trade Remains Uncertain
Trade conditions in 2025 do not inspire confidence, particularly for agricultural exporters. However, two developments could offer relief in 2026:
Trade policies are currently under review by US courts, which could curb excessive tariff actions.
Trade sentiment may improve as three US Congressmen have introduced a resolution opposing tariffs on India.
Conclusion
Multilateral trade is at a crossroads. As Western nations increasingly prioritise domestic protection over global cooperation, emerging Asian economies face heightened uncertainty. The coming year will be critical in determining whether global leaders recalibrate their approach or continue down a path that weakens the foundations of international trade.