The Global Trading System Faces a Historic Change

This article originally appeared in the Barcelona Centre for International Affairs’ CIDOB International Yearbook 2026 and was translated to Spanish and Catalan. It is reprinted with permission.

Just weeks into his second term as president, Donald J. Trump resumed his assault on the global trading system, and in doing so, upended U.S. trade policy. Calling on emergency powers used in exceptional circumstances, he launched a trade war with Washington’s three main trading partners, including Canada and Mexico. Many around the world breathed a sigh of relief, assuming that Trump would put the sweeping tariffs he had promised on the campaign trail on hold. But that was just the beginning. Two months later, on April 2, 2025, came “Liberation Day,” when Trump expanded his tariff campaign, imposing a sweeping 10 percent tariff on all imports, while singling out a number of specific countries with tariffs up to 50 percent based on trade surpluses.

Panic spread across markets, and Trump quickly backpedaled; while maintaining a baseline 10 percent tariff across-the-board, he urged many countries to strike deals with the United States within 90 days to avoid the reimposition of tariffs. Many U.S. trading partners scrambled to prepare offers to assuage the president. Within a few days, Vietnam offered to slash all its tariffs on the U.S. to zero; it was flatly rejected. The United Kingdom, on the other hand, struck a deal by offering limited market access in agriculture, and other vaguely defined commitments. However, none of these proposals seem sufficient, and the formula that could appease Trump remains a mystery.

Trade experts are struggling to make sense of the Trump administration’s approach. Their actions to date are in many ways a departure from his first term, which was more targeted in its trade protection against allies, and a broader, drawn-out trade fight with China. This time, Trump is “flooding the zone” with an episodic onslaught of dizzying actions. Although administration officials have named several objectives—including reducing the trade deficit, increasing manufacturing jobs, and growing household wealth—the policy actions thus far have cut against achieving them. It is not that this administration does not understand basic economics; some of Trump’s advisors certainly do. But what has been seen during the first months of Trump's trade agenda has been a lack of a trade strategy from the Administration and a weak ideological framework. 

The implications for the global trading system are significant. U.S. trading partners should not be convinced that any deals they reach with Trump will end the chaos. Nor should they hold on to hope that a new president in 2029 will change course: Joe Biden maintained most of Trump’s trade policies, and Democrats quietly approved the executive branch’s abuses of trade authority. There is no going back, nor is there a way forward that relies on the United States as the linchpin of the global trading system. Three core shifts in U.S. foreign policy—the rejection of trade rules, the growth of the imperial presidency, and the erosion of alliances—illustrate why traditional approaches will not save the trading system and why treating this current period as an interregnum could speed up its decline.

However, there are also reasons for optimism. Although the international trading system is under attack, it has not yet been dismantled, and no one has been able to draw up a credible alternative that could replace it. This opens up an opportunity for those who are willing to preserve what works and transform what does not; there is still time to reshape the system without destroying it.

What Are Trade Rules For?

In the late nineteenth and early twentieth centuries, waves of protectionist policies were triggered, in large part, by massive trade disruptions: recession in Europe, the First World War, the Great Depression, and the Second World War. Writing in 1945, economist Albert O. Hirschman reflected on “the political aspect of international trade,” whereby Germany wielded asymmetrical power over smaller countries through their dependence on German manufacturers.^[1] This ability to weaponize trade deeply worried Hirschman, who called for international governance to prevent the use of trade as statecraft. In the United States, President Franklin Delano Roosevelt’s secretary of state, Cordell Hull, held similar views, and pushed for trade liberalization and the peaceful resolution of economic disputes.

Since then, the prevailing view in the United States has supported the expansion of U.S. trade opportunities and the maintenance of global trade rules applied equally to everyone. However, increasing competition from China has shifted the debate toward protectionism, and U.S. policymakers have begun to question whether the postwar rules continue to provide sufficient benefits. In the 2016 campaign, Trump decried the North American Free Trade Agreement as “the worst deal ever made,” and lambasted Hillary Clinton for her support of the Trans Pacific Partnership Agreement, to which she reacted by opposing it shortly after it was signed, even though she had previously championed it.^[2] During the 2020 campaign, Biden criticized Trump’s tariff policy, saying, “Trump doesn’t get the basics. He thinks his tariffs are being paid by China. Any freshman econ student could tell you that the American people are paying his tariffs.”^[3] However, as a tenant of the White House, Biden chose to maintain the same tariffs. 

It can therefore be said that both presidents—Trump and Biden—have contributed to the erosion of trade rules. Their trade war with China, facilitated by the abuse of a law that grants the president authority to address unfair trade practices, broke with U.S. commitments in implementing the rules of the World Trade Organization (WTO).^[4] Past presidents, including Barack Obama, brought disputes on China’s unfair trade practices to the WTO. However, Trump’s first U.S. trade representative, Robert Lighthizer, claimed that the issues he wished to address lay outside the WTO’s purview. Trump has also unearthed another law to impose high tariffs on steel and aluminum on the pretext of national security (which Biden maintained or converted into country-specific tariff-rate quotas), and has threatened many others. Back in office, Trump has shown even more affection for this tool. The bottom line is that neither administration supported traditional trade agreements. Indeed, Biden’s national security advisor, Jake Sullivan, praised the Indo-Pacific Economic Framework for its lack of traditional trade norms.^[5] The second Trump administration is currently negotiating its own agreements, with explicit references to their non-binding nature. It is therefore unclear what legal status the resulting agreements will have.

For U.S. trading partners seeking market access, those attitudes suggest that the agreements they are currently negotiating will be temporary and subject to constant revision. Until now, trade agreements mattered because they made the economic relationship between signatories predictable, with both sides agreeing to play by the same rules. Today, there are no rules for the United States, while other countries face a growing list of demands, which provides little incentive for them to negotiate substantive agreements. On the other hand, the unprecedented breakdown of U.S. tariff commitments—and the willingness of its trading partners to largely accept a new baseline 10 percent U.S. tariff—suggests that existing rules are incredibly fragile, and that no state is willing to protect them. This circumstance endangers the entire global trading system, especially if other countries follow the example of the United States.

The Rise of the Imperial Presidency

For years, there has been a growing number of voices warning about the growth of presidential power in the United States. Historian Arthur M. Schlesinger Jr. explains that the U.S. Constitution “envisages a strong presidency within an equally strong system of accountability,” but that “when the constitutional balance is upset in favor of presidential power and at the expense of presidential accountability, the presidency can be said to become imperial.”^[6] Libertarians have also warned of the dangerous “cult of the presidency,” whereby Americans imbue the president with an expansive role “that’s a combination of guardian angel, shaman, and supreme warlord of the earth.”^[7] However, it was not until Trump’s first election that the implications of an imperial presidency for trade policy were seriously considered. Some legal scholars rightly linked Trump’s tariff policy and his core constituency, arguing that he had to deliver on his campaign promises.^[8] The reason for this, they argued, stems from decades of frustration over the inability of Congress to address the distributional consequences of trade. Thus, the president is now using his powers to carry out redistribution without Congressional intervention. This also coincides with the courts’ inability to check presidential power.

The sad reality is that Americans only seem to care about presidential overreach when it comes from a party they don’t vote for. Republicans refused to challenge Trump in his first term, just as Democrats turned a blind eye to Biden’s overreach during his presidency. Indeed, when Congress took steps to reclaim some of its authority on trade, passing a bill that would expand Congress’s role in trade negotiations with Taiwan, Biden told Congress that he would treat their new requirements as “non-binding” in cases where they “would impermissibly infringe upon my constitutional authority to negotiate with a foreign partner.”^[9] Along similar lines, several Trump administration officials have reaffirmed the president’s expansive view of trade authority, even in the face of an unsuccessful court challenge.

The current marginalization of Congress has important implications for America’s partners. First, there is little incentive to lobby Congress for preferential treatment when it has abdicated its responsibility to check presidential power on trade and has been sidelined on the content of the so-called trade deals. Second, with contemporary trade deals skirting congressional approval, the durability of those pacts is in question. As the Biden-Trump transition has shown, a president can quickly undo agreements reached by his predecessor. Third, with an increasingly ignored Congress, trade agreements will no longer try to strike a balance between offensive and defensive interests; the president can choose which objectives to prioritize while minimizing opposition to his policies by targeting the most politically salient domestic industries and export interests. This approach to trade policy means that negotiations are not focused on benefitting the United States as a whole, but rather that trade agreements are aimed at obtaining benefits for a select few. Therefore, the previous arguments in favor of agreements that benefit all parties disappear. In this scenario, trading partners will have to reorient their positions to see what they can offer the president, without necessarily receiving reciprocal benefits. 

The Erosion of Alliances

The international order that the United States established at the end of World War II has unraveled in a matter of months. Trump has repeatedly threatened to annex Canada and hinted at buying Greenland. He has courted a key U.S. adversary, Russian President Vladimir Putin, and threatened to withdraw from NATO. He has even raised doubts about whether the United States would come to the aid of a NATO ally in the event of an attack.

Kori Schake, a former U.S. national security council official under the George W. Bush administration, argues that the United States risks becoming a dispensable nation by failing to recognize that its power comes largely from cooperative efforts, not coercion. Schake notes that the Trump administration “takes for granted all the benefits that a cooperative approach has yielded, and cannot envision a future in which other countries opt-out of the existing U.S.-led international order or construct a new one that would be antagonistic to American interests.”^[10] Recent polls in countries considered U.S. allies reveal, for example, that one-in-four Canadians see the United States as an enemy country,^[11] and Europe is also showing a loss of trust in the United States.^[12] Even more worrying for Washington’s postulates are polls suggesting that China’s global standing is better than that of the United States’.^[13]

The Trump administration is myopic in measuring the costs of abandoning soft power and relying entirely on economic coercion and hard power (or the threat of them), treating allies and adversaries with equal harshness. Paradoxically, the erosion of alliances also runs counter to one of the administration’s central goals: making American trade more resilient and secure. While some officials have claimed that they are not pursuing autarky, Trump’s constant retort that “if you make it here you won’t face tariffs” contradicts those claims. A Trump administration official recently stated privately that “the closer you are to hostility, more basic goods become strategic,” such as textiles and boots. But then, in an environment where the United States is hostile toward everyone, is everything that is exchanged now strategic? Ironically, this worldview undermines U.S. commercial security and weakens the United States’ traditional role as a rule-maker, drawing rejection from those who perceive it as a blatant use of economic coercion.

Revisionists Without a Vision

Looking at the state of the world today, it is easy to feel downcast. Even in those scenarios where war, geopolitical conflicts, social tensions and climate emergencies do not worsen, they do show signs of intensifying in the future. And economic uncertainty adds fuel to the fire. Global growth is expected to decline,^[14] and the WTO forecasts a 0.2 percent decline in world merchandise trade, “nearly three percentage points lower than it would have been without recent policy shifts,” marking “a significant reversal from the start of the year.”^[15] Despite the unpredictable environment, it is important to remember that the vast majority of states do not want this scenario. So, while 2025 will undoubtedly be remembered as a chaotic year for U.S. trade policy, it could also be remembered as the year in which the rest of the world woke up.

The United States has been increasingly aggressive in its attack on trade over the past eight years. The planners of this war on trade come from both sides of the political spectrum, yet they have made similar criticisms of the current system. Robert Lighthizer has called for “A New American System,”^[16] referring to Congressman Henry Clay’s 1824 plea for “adequate protection against the otherwise overwhelming influence of foreigners … only to be accomplished by the establishment of a tariff.”^[17] Similarly, Jake Sullivan has argued that the first step toward a more vibrant middle class “is laying a new foundation at home—with a modern American industrial strategy.”^[18] Clay would also be proud of Biden’s U.S. trade representative, Katherine Tai, making the (false) claim that tariffs do not contribute to inflation^[19] and that, instead, can be a tool that helps promote economic dynamism.^[20] Trump’s Treasury Secretary, Scott Bessent, has similarly claimed that tariffs will generate substantial revenue and allow the United States to recover manufacturing jobs.^[21] But some defenders of the United States’ neo-mercantilist legacy^[22] have gone further, calling for a post-neoliberal order “based on the premise that the state can and must shape markets.”^[23]

Each of those arguments have been thoroughly refuted by a number of scholars. Gordon Hanson, one of the authors of the famous China Shock paper, observed that Lighthizer’s worldview—as set out in his book, No Trade Is Free—is based on “misconceptions about the United States’ industrial decline, which have led the author to rail against trade agreements.”^[24] He adds that “the main solution [Lighthizer] offers to counter job losses—import restrictions—does not work.” Ed Gresser  of the Progressive Policy Institute called Jake Sullivan’s speech a “breezy missummarization of history, muddy elucidation of current choices, and unclear future direction.”^[25] Finally, economist Jason Furman has criticized what he calls the “Post-Neoliberal Delusion,” for failing to account for the trade-offs in economic strategy, which, as expected, generated frustration among voters in 2024.^[26] Political scientist Daniel Drezner has also expressed concern about the vagueness of the policy statements from the post-neoliberal sphere, which often fail to specify the ends they seek to achieve through their policies.^[27] In short, the ideas that support the leap into the void of U.S. trade policy are poorly formulated, full of contradictions, and governed more by vibes than by facts. Their intellectual foundations are weak, as they are simultaneously fed by diverse currents of neo-mercantilist thought, resulting in a patchwork of ideas. 

This disagreement is a reason for optimism about the future of the international trading system, as changes proposed by skeptics of the current system have done little to convince public opinion. The history of the international trading system is long, subject to recurring criticism, and has suffered numerous crises. The experience has been marked by three phases: retrenchment, regrouping, and rebuilding. The world is currently in the first phase, and it would be a mistake to think that it will remain that way. The rest of the world has an opportunity to regroup and reposition the architecture of the rules-based trade system to meet modern challenges. U.S. trading partners can turn to other institutions to build strong trade relationships. They can negotiate plurilateral agreements inside and outside of the WTO. And, even if trade rules are violated in their dealings with the United States, they can agree to preserve those rules among themselves. For example, since the United States blocked the appointment of judges to the WTO Appellate Body, some WTO members established their own appeals process outside of the WTO, the Multi-Party Interim Appeal Arbitration Agreement.

The WTO’s chief economist, Ralph Ossa, raised an important point in the wake of the world’s response to Trump’s trade chaos: “87 per cent of global merchandise trade takes place outside the United States,” and “bilateral trade between the United States and China accounts for around 3 per cent [of global trade],” which “is a reminder of the importance of other trading relationships.”^[28] The story of the longest period of peaceful economic exchange and sustained trade liberalization is not yet over, but it faces its most significant challenge. What happens next depends less on the challenger, and more on the reactions of other states as they navigate this latest crisis.