In One Sentence

• President Trump on January 26 threatened to raise tariffs on South Korean automobiles, auto parts, lumber, pharmaceuticals, and other goods from 15% to 25%, accusing Seoul of failing to ratify a July trade agreement and criticizing its new digital regulations. 
• President Trump on February 2 announced a new trade deal with India in which the U.S. will cut tariffs on Indian goods to 18% and India would curb purchases of Russian oil, boost imports from the United States, and lower its own trade barriers.
• The United States and Mexico on January 28 agreed to launch formal talks on possible structural and strategic reforms, including rules of origin, critical minerals, and non-tariff barriers, ahead of the July review of the U.S.-Mexico-Canada Agreement.
• On January 30, a WTO dispute settlement panel ruled in China’s favor, finding that U.S. clean-energy tax credits in the Inflation Reduction Act violated WTO rules and are not justified under the “public morals” exception. 
• At the World Economic Forum in Davos, WTO Director-General Ngozi Okonjo-Iweala maintained that the international trading system is “resilient” while acknowledging that “things need to change.”

• On January 29, the Treasury Department’s report found that no U.S. trading partner qualified as a currency “manipulator,” but added Thailand to the monitoring list which includes countries like China, Japan, South Korea, Singapore and Germany.  
• After initially voicing support for Prime Minister Carney’s visit to China, President Trump later on January 24 threatened 100% tariffs on Canada if the country signs a trade deal with China. 
• On January 30, Trump announced the nomination of Kevin Warsh to be the next chair of the Federal Reserve, calling him “central casting” who will “never let you down.”

Mark the Essentials

• On January 22, two U.S. venture capital firms petitioned the U.S. Trade Representative to launch a Section 301 investigation into South Korea, alleging its government has discriminated against U.S.-headquartered Coupang through disproportionate enforcement actions following a data breach, and urged tariffs, services restrictions, and stronger protections for U.S. firms under U.S.-Korea trade rules.
• President Trump on January 29 said he was decertifying Canadian-made aircraft and threatened a 50% tariff on aircraft imports from Canada unless Ottawa certifies U.S.-made Gulfstream jets.
• Commerce Secretary Howard Lutnick warned that Prime Minister Carney’s outreach to China and criticism of economic coercion risk undermining Canada’s position in the upcoming USMCA review by calling into question the preferential trade treatment Canada receives from the United States.
• President Trump on January 29 issued an executive order invoking the IEEPA threatening secondary tariffs on countries supplying oil to Cuba.
• The U.S. and El Salvador signed a reciprocal trade agreement that eliminates tariffs on hundreds of Salvadoran goods, caps others at 10%, and commits El Salvador to reduce non-tariff barriers, strengthen labor, digital trade and intellectual property rules, while preserving U.S. authority to impose future tariffs for security or trade enforcement reasons.
• China welcomed the WTO ruling on IRA tax credits, calling on the U.S. to correct its erroneous practices while USTR termed the judgment as “absurd” and a proof of WTO’s “inadequate” rules.
• The WTO Director-General defended the international trade body, highlighting that despite unilateral tariff measures, around “72% of world trade” was still being conducted on “ WTO terms,” while calling for a “conversation” on the most-favored-nation principle that requires members to treat all others equally. 
• Kevin Warsh, a former Fed governor from 2006 to 2011, had earlier criticized current Fed policy, calling for lower interest rates and argued that Trump’s tariffs would not lead to higher inflation.

Keeping an Eye On…

President Trump’s disdain for international organizations is persistent. In early January, he withdrew the U.S. from 31 United Nations entities, including the UNCTAD (UN Trade and Development), as part of a larger recusal from 66 international organizations; the WTO was not one of them though. To the contrary, the Trump administration quietly restarted paying its backlog of dues to the organization last year. There is evidently value in the WTO to them, possibly in the negotiating and rulemaking functions. However, that value proposition does not extend to the organization’s dispute settlement methods. Since December 2019, successive Trump administrations, with an assist by the Biden administration, have sabotaged the functioning of the Appellate Body by blocking the formation of a quorum to hear appeals cases. Adverse panel rulings get kicked into the long grass and the dispute settlement arm can no longer act as a check on unilateral U.S. action.

This logic was on display last week with a WTO panel siding against the U.S. in a China-brought case against certain Inflation Reduction Act (IRA) tax credits on renewable energy and clean electricity instituted by the Biden administration, whereas the solar, wind, and EV tax credits have been excised by Trump. This time around, the U.S. didn’t try to justify the legal validity of its subsidies. The administration readily admitted that the subsidies—contingent on the use of domestic over imported goods—were non-compliant under the WTO Subsidies and Countervailing Measures (SCM) agreement. Rather, the administration invoked the General Exceptions article (Article XX of GATT 1994) to argue that the measures were “necessary to protect public morals.” The basis of the argument is as follows: China achieved its dominance in the renewable energy sector through pervasive non-market policies and practices that undermine fair competition, therefore the U.S. must countervail this behavior and the distortions that it created via the IRA subsidies.  

This ‘public morals’ argument sounds familiar; it is the exact one that was trotted out by the Biden administration to defend the first Trump administration’s July 2018 and September 2018 Section 301 tariffs against China. In that case, the Biden administration had argued that China’s policies and practices of using “coercion and subterfuge to steal or otherwise improperly acquire intellectual property” implicated public morals because it violated “prevailing U.S. standards of right and wrong as reflected in the state and federal laws of the U.S.” and “the sense of right and wrong held by U.S. society [which would be] further offended if such fundamentally unfair policies and practices are left unchecked.” Unsurprisingly, the arbitral panel shot down that justification. In 250 pages of investigative groundwork by the administration prior to imposing the tariffs, there was nary a reference to the words ‘public morals’ in its findings. Besides, the administration had provided no evidence to identify and explain the relationship between the chosen measures, the additional tariffs, and the public morals objective being pursued. 

The WTO panel’s ruling last week in the IRA case hews a similar line of argument. The panel noted the relevant inquiry is not whether Biden’s IRA was designed to increase domestic production or reduce reliance on China, but whether it was designed to protect the U.S.’ morals against supposedly unfair competition, forced labor, theft, and coercion. On this count, the U.S. had failed to satisfactorily explain the link between the chosen measure and the public morals objective being pursued. In fact, several aspects of the design and structure of the tax credits bore little relevance to the protection of public morals. Typically, the ‘public morals’ justification has been utilized in cases featuring: (a) money laundering, organized crime, and underage or pathological gambling, (b) the dissemination of audio-visual products and publications that contain morally objectionable content, and (c) harm to animal welfare. None are implicated in the current case against China’s industrial policies.

The WTO panel recommended that the U.S. withdraw the relevant IRA tax credits by October 2026. Yet that ruling has already been thrown out and recycled. So, what next? The U.S., unlike China, Japan, or the EU, is not a member of the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), an alternative appeals mechanism under Article 25 of the WTO’s Dispute Settlement Understanding to provide a review of WTO panel reports in the absence of the Appellate Body’s functioning. As such, the U.S.’ appealing of the ruling to the Appellate Body essentially amounts to appealing the ruling into the void. On trade and the WTO’s dispute settlement function, there is much more that binds Trump and Biden together than sets them apart.

Expanded Reading

• Trump Announces Initial Trade Deal With India, The New York Times, February 2, 2026

• WTO sides with China in clean energy dispute against US, PoiliticoPro, January 30, 2026

• What to Know About Kevin Warsh, Trump’s Pick to Lead the Fed, The New York Times, January 30, 2026

• Mexico’s Sheinbaum, Trump talk trade as USMCA review approaches, Reuters, January 29, 2026

• Trump Threatens Canada With More Tariffs Over Jet Snag, Bloomberg, January 29, 2026

• US Treasury strengthens currency monitoring criteria, but finds no manipulation, Reuters, January 29, 2026 

• Trump declares national emergency over Cuba, threatens tariffs on nations that supply oil to communist regime, Fox News, January 29, 2026

• Ambassador Greer Signs the U.S.-El Salvador Agreement on Reciprocal Trade, U.S. Embassy in El Salvador, January 29, 2026

• Trump threatens to increase tariffs on South Korea, Politico, January 26, 2026

• Trump warns Canada of 100% tariffs if it becomes China’s ‘drop off port’ with new potential trade deal, Fox News, January 24, 2026

• DG Okonjo-Iweala urges “steady nerves” amid trade tensions; ministers discuss WTO reform, World Trade Organization, January 23, 2026

• Lutnick Rejects Canada’s China Tilt, Sees Summer USMCA Talks, Bloomberg, January 22, 2026

• Coupang investors seek US probe over South Korea’s handling of data leak, Reuters, January 22, 2026