Just before year-end 2025, the Trump administration quietly told the World Trade Organization that the United States no longer considers “most favored nation” (MFN) treatment fit for purpose for the world economy. MFN is the basic principle that a country must extend the same tariff rates and trade conditions it grants to any one trading partner to all others. It is the centerpiece of the WTO and the foundation of the modern multilateral trading system.
Scrapping it, as the administration is now attempting to do, would be a disastrous mistake. In its submission to the WTO, the Trump administration described MFN as “unsuitable for this era” of intensifying trade clashes, arguing that discrimination in trade is essential. U.S. Trade Representative Jamieson Greer has gone so far as to characterize WTO rules—a system in which MFN is central—as a “suicide pact” that, if followed, condemns the United States to economic decline.
The MFN principle is built upon trust. If one country abandons it, others have a strong incentive to follow suit. What results is an endless exchange of protectionist trade measures that weaken economic growth and raise prices. And despite what President Donald Trump insists, it would leave the American people not freer but poorer. Jettisoning MFN would be by far the worst of all the disruptions of international trade rules instigated by an administration that has upended normal trading relationships globally.
It is not difficult to understand why. The world economy is six times larger than it was when the WTO-based system was established soon after World War II. Much of that growth has resulted from international economic integration, driven by a 43-fold increase in the volume of world trade. Much of that expansion can be traced to MFN. U.S. exporters, businesses, workers, farmers, and ranchers have benefited enormously from the legal commitment to this principle because it increases trade volumes and thereby maximizes gains from trade. Lost trade gains, lost opportunities, and lost jobs for Americans would all follow if MFN were discarded.
The president’s unpredictable unilateralism in applying tariffs, despite the recent rebuff by the Supreme Court over his use of the International Emergency Economic Powers Act of 1977, has already eroded MFN and harmed the American economy by raising prices, reducing consumer choice, strangling competition, and stifling innovation. Departing from MFN altogether would have far worse economic effects in the United States and across the world.
The answer is not to abolish most-favored-nation but to refine and modernize the existing exceptions.
In part, opposition to the MFN principle may be based on a misunderstanding of what it is, not least by many politicians and the press. Indeed, the term “most favored nation” is misleading—Congress accordingly began calling the principle “normal trade relations” in 1998, and later “permanent normal trade relations”—because the rule does not afford better trade treatment to certain countries’ products but instead requires equal treatment for all like imported products. If a tariff cut or other trade benefit is given to one country’s products, it must be given immediately and unconditionally to all others. This obligation is enshrined in the very first article of the General Agreement on Tariffs and Trade, the 1947 international agreement that now binds all WTO members and underpins the multilateral trading system. The equal market access that results multiplies trade and global benefits.
Currently, 166 countries participate in the WTO, representing about 98 percent of global commerce. MFN multiplies the benefits of any single trade concession across all members, dramatically boosting trade for a given product. Over decades, successive global trade agreements applying MFN have consistently demonstrated the worth of this approach, raising living standards and prosperity in the United States and worldwide.
The Trump administration characterizes MFN as overly rigid and maintains that the United States must be free to pick and choose which countries receive increased access to its market, often for reasons unrelated to trade. Yet MFN has never been absolute. Exceptions exist for health, safety, and environmental reasons; for national security; for free trade agreements; for trade preferences for poorer countries; and to counter unfair trade practices such as dumping and subsidies. MFN is not a legal ball and chain. The problem is that the president seeks the freedom to violate this principle for entirely arbitrary reasons, as he has frequently done.
Legitimate concerns about unfair Chinese trade practices can be addressed under existing WTO rules without abandoning the basic WTO principle. Importantly, this includes the subsidies China’s government provides to its domestic producers that give them an unfair advantage in the Chinese and global marketplace. Chinese violations of intellectual property rights can also be addressed without changing the basic rules.
And they often have been. In the vast majority of cases in which the United States brought a complaint against China, the WTO sided with the United States. On average, the WTO achieved results in just eight months because China complied with the WTO ruling. The president, meanwhile, has been fighting his own trade wars well beyond that timeframe.
And while it may sound jarring to many Americans, given the common perception of China as a habitual rule-breaker, the record shows that China complies with the vast majority of its WTO obligations. In fact, one could argue that in recent years China has adhered more closely to those commitments than the United States. By contrast, most of the unilateral and discriminatory tariffs imposed by President Trump are illegal violations of the WTO’s MFN rule.
Spurred by the United States, the members of the WTO will be discussing this foundational question for the trading system at their ministerial conference in Cameroon later this month. The answer is not to abolish MFN but to refine and modernize the existing exceptions. Better rules are needed to discipline industrial subsidies, not only by China, but by all countries employing protectionist industrial policies. Clarification is needed on what constitutes a developing country and the trade advantages that status entails. Better rules are needed to preserve limited natural resources, which may justify some carefully tailored trade discrimination. These and other reforms can address 21st-century global trade challenges.
There can and should be exceptions to MFN—but they must remain exceptions. They must not engulf the basic rule of nondiscrimination, which has been the source of so much American and global prosperity and can be the source of much more. Trump’s proposal to abandon MFN should itself be abandoned, and rational negotiations should implement the targeted exceptions that are truly necessary. This requires far-sighted sophistication in trade negotiation that has so far eluded the president. In international trade, at least, he has not mastered the art of the deal.
