Donald Trump’s presidency fundamentally reshaped the global trading system within an astonishingly short period, dismantling established norms that had evolved over seven decades. This rapid transformation, perhaps even exceeding the expectations of the former US president himself, was facilitated by a surprising willingness among other nations to abandon the rules-based trading order many had long championed as crucial for international economic prosperity. The profound shift in international economic policy under the Trump administration warrants a detailed examination to understand its far-reaching implications for global commerce.
A critical indicator of this monumental shift is the dramatic increase in effective tariffs worldwide. At the start of the Trump administration, the average global tariff rate stood at approximately 2.5 percent. Today, this figure has soared to over 15 percent, with further increases anticipated, pushing the US rate close to 20 percent—a level not seen in a century and nearly eight times higher than at the beginning of the year. These significant shifts in US tariffs highlight an unprecedented departure from decades of established trade practices, redefining the landscape of international markets and trade negotiations.
The pivotal moment signaling this new dynamic was exemplified by European Commission President Ursula von der Leyen’s direct engagement with Trump at his golf course in Scotland, negotiating a bilateral trade deal. This move starkly contrasted with the European Union’s historical preference for multilateral trade negotiations, underscoring a rapid adaptation to the new realities of US foreign policy and economic policy. Just months prior, the EU had staunchly defended the World Trade Organization (WTO) and its principles, condemning US tariffs as violations of commitments, yet the practical need for direct deals quickly superseded these long-held positions.
Remarkably, the swiftness with which the global trading system was upended cannot be attributed solely to the United States’ considerable economic leverage. Many countries, with the notable exception of China, chose not to retaliate against Trump’s trade policy. Instead, they opted to engage in bilateral negotiations, often agreeing to terms that seemed implausible just weeks earlier, including commitments to make additional investments in the United States. This suggests a more complex dynamic at play, indicating that other nations were, in a sense, willing partners in this profound redefinition of trade agreements.
Trump’s approach redefined the very essence of a trade deal. Traditionally, US trade agreements focused on mutual reductions in tariff and non-tariff barriers to foster shared economic prosperity. However, under the Trump administration, a “trade deal” often involved enshrining high tariffs—typically 15 percent or more—on another country, in exchange for that country’s commitment to increased investments within the United States. This novel strategy fundamentally altered the framework for international trade negotiations and had a direct impact on global trade policy.
The readiness of so many countries to participate in these bilateral negotiations and offer seemingly unrealistic investment promises reflects a deeper underlying frustration with the laborious and often painful nature of traditional trade negotiations over the past two decades. Figures like former European Trade Commissioner Peter Mandelson highlighted the “collective failure” of previous rounds, such as the WTO’s Doha Round, to adapt global trade rules to the rise of economic powers like China and India. This long-standing disillusionment meant that while Trump indeed shattered the system, its increasing brittleness over years paved the way for the speed and scale of its demolition.
Consequently, the global trading system finds itself in a state of confusion and contradiction. Major economic powers, such as the EU, may attempt to maintain a dual system—one for trade deals with the United States and another for agreements with other nations. However, this theory overlooks a crucial element: the long-standing stability of the global trading system relied on the world’s most militarily and economically powerful nation, the United States, adhering to the same rules as everyone else. Without the US fully embedded in that multilateral framework, the incentives for other countries to play by the old rules will inevitably diminish, impacting international economic policy for years to come.
Many nations may harbor the belief that the global trading system will revert to its pre-Trump state once his administration concludes. This hope might explain the three-year investment commitments embedded in some of the deals Trump struck. However, future US presidents, regardless of their political affiliation, will likely face significant challenges in simply lowering tariff rates back to previous levels. If, for instance, the EU has already committed to near-zero tariff rates on US imports, a future US administration would gain little by simply reverting to the old system without securing new reciprocal concessions, making a full return to prior global trade policy unlikely.
Since the General Agreement on Tariffs and Trade (GATT) in 1947, and its evolution into the WTO, successive US administrations from both major parties generally believed that free trade served US interests by strengthening ties, spurring economic growth, and delivering cheaper goods, all while demonstrating a hegemon could operate within a multilateral framework. While imperfect, this system was viewed as superior to protectionism. Donald Trump, however, holds a fundamentally different view, actively resetting the global trading system according to his preferences, and the rest of the world is rapidly adapting to this new era of trade negotiations and economic policy.
