Nobel prize-winning US economist Joseph Stiglitz looks on as he presides a "Commission on the value of the climate action" at the Agence française de developpement (AFD) in Paris on January 31, 2017. Jacques Demarthon, AFP

(UPDATED) Nobel economics laureate Joseph Stiglitz argued at a global conference Thursday that nations should counter the policies of US President Donald Trump's "dysfunctional" administration by imposing tariffs and taxing American multinationals.

The American economist was speaking at a conference on corporate tax reform held in Vatican City, with speakers including Brazilian President Luiz Inacio Lula da Silva and Spanish Prime Minister Pedro Sanchez.

"We have to think of ways to respond creatively to what is a dysfunctional government in the United States," said Stiglitz, who has long championed reform of international tax rules to ensure multinational corporations pay their fair share.

He said Trump's move this week to freeze enforcement of a long-established anti-bribery law was symbolic of the "illicit flows" across borders due to corruption.

"Now we have the president of the United States saying bribery is OK. 'It's going to be great for American business,' he said," Stiglitz said.

Trump on Monday ordered the Department of Justice to freeze enforcement of the Foreign Corrupt Practices Act, a law prohibiting US companies from bribing foreign government officials to gain business.

Stiglitz said the international community should expand its use of "countervailing duties", or tariffs imposed by one country to counter subsidies by another, "to say, if you allow bribery, that is a subsidy to your companies".

"If you don't do anything about climate change that's a subsidy and those countries that are engaged in not dealing with climate change face an extra tax," he added.

"If the United States disbands its USAID programme, causing an enormous suffering around the world without any notice, abuse of human rights in a basic way, the rest of the world should say, 'Well, we will tax your multinationals to get the revenue to maintain USAID."

Stiglitz is the co-chair of Independent Commission for the Reform of International Corporate Taxation (ICRICT), an organisation that seeks to put an end to tax havens, and which convened Thursday's meeting.

In November, G20 leaders agreed in Rio di Janeiro to cooperate to get the world's billionaires to pay more in tax.

But efforts to reduce loopholes for multinational cooperations on the global level have stalled.

Trump has pulled the US out of the Organisation for Economic Co-operation and Development's (OECD) global tax deal, signed by close to 140 countries, which levies a 15 percent minimum tax on corporate profits.

Trump's reciprocal tariffs 

Trump, meanwhile, announced that he would impose "reciprocal tariffs" on US trading partners on Thursday, opening new fronts in a trade war.

"Three great weeks, perhaps the best ever, but today is the big one: reciprocal tariffs!!! Make America great again!!!" Trump said in a post in all capital letters on his Truth Social platform.

The move would match the United States' tariff rates on imports to the levels that other countries impose on US goods.

Analysts have warned that reciprocal duties could bring a broad tariff hike to emerging market economies such as India and Thailand, which tend to have higher effective tariff rates on US goods.

Countries that have trade deals with Washington such as South Korea are less at risk from this move, analysts believe.

During election campaigning, Trump promised: "An eye for an eye, a tariff for a tariff, same exact amount."

For example, if India imposes a 25-percent tariff on US autos, Washington will have a 25-percent tariff as well on imports of autos from India, explained a Nomura report this week.

"Trump's objective of implementing reciprocal tariffs is to ensure fair treatment for US exports, which could indirectly also address US trade imbalances with partner countries," analysts at Nomura said.

Among Asian economies, India has a 9.5-percent weighted average effective tariff on US exports, while there is a three-percent rate on India's exports to the United States.

Thailand has a 6.2-percent rate and China a 7.1-percent rate on US products.

But higher tariffs are also often imposed by poorer countries, who use them as a tool for revenue and protection because they have fewer resources to impose non-tariff barriers such as regulatory protectionism, Cato Institute vice president of general economics Scott Lincicome earlier told AFP.

It remains unclear if Trump views reciprocal tariffs as an alternative to a universal tariff of between 10 and 20 percent, which he floated in the lead-up to last year's US presidential election, or as a separate policy.