https://www.project-syndicate.org/magazine/from-us-centered-rules-based-order-to-post-liberal-disorder-by-benn-steil-2025-06
The Post-Liberal Disorder
Jun 15, 2025BENN
STEIL
The effect of Trump’s wayward tariffs, refusal to
confirm WTO appellate judges, and repeated invocation of “national security” to
cloak mercantilism is likely to erode global trade norms that were built up
over eight decades. The result will be a rapid dissipation of US soft power,
and a world more conducive to authoritarianism.
NEW YORK –
Donald Trump’s re-election last year was bound to send shock waves through the
global economy and what is widely known as the “liberal” or “rules-based”
international order. And so it has, as Trump has made good on his promise to
tear that order down.
1. The order
that Trump is determined to destroy was established in the immediate postwar
years through deliberate policy actions by the United States – then at the apex
of its global economic and military dominance. The institutions created to
preside over the new order included “One World” structures designed to
facilitate global cooperation – most notably the United Nations, the International
Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade
(GATT). There were also “Two World” structures to promote the integration of
non-communist Europe – most notably, the Marshall Plan, NATO, and predecessors
to the European Union (such as the European Coal and Steel Community and the
European Payments Union).
Under the new
Trump administration, the US has become hostile to each of these postwar
pillars, seeking not a new “order” but a disorder that can be exploited, opportunistically,
for presumed US economic and territorial advantage. The president appears
determined to implement a radical program of American autarky, consistent with
the philosophy he famously scribbled in the
margins of a speech during his first term in the White House: “TRADE IS BAD.”
The
multilateral trade regime – built under the aegis of the GATT and
institutionalized by the establishment, in 1995, of the GATT’s successor, the
World Trade Organization – is now effectively dead and buried. Since 2019,
during Trump’s first term, the Appellate Body for the WTO’s Dispute Settlement
Mechanism has been inquorate – decapitated by American refusals to approve judges.
For more than five years, no WTO decision has been legally enforceable.
Furthermore,
notifications to the WTO of new trade barriers justified on “national security”
grounds have soared since 2019, covering even products as innocuous as
doorframes, coffee beans, and alcoholic beverages. Such exceptions render trade
actions injudicable – at least under the US legal interpretation. Since 2017,
the US alone has filed 30 such notifications. Mexico has filed 14, and
Switzerland, Brazil, and Saudi Arabia have filed, 12, 10, and eight,
respectively. In 2024, “national security” notifications reached an all-time
high of 95.
Trump’s
“reciprocal” tariffs would also appear to violate US commitments under WTO Most
Favored Nation rules (applying identical rates across member states) and Tariff
Binding rules (establishing maximum rates). When the world’s leading importer
brazenly flouts its most basic legal commitments, and decapitates the body
empowered to sanction such action, it seems clear that the prevailing regime is
a dead letter.
Another major
threat to the multilateral trading system is America’s ever-widening
application of financial sanctions. Restricting other states’ ability to access
the US banking system also prevents them from trading in US dollars.
The
international role of the dollar has underpinned the multilateral trading
system since its birth in 1947. Although the US share of
global GDP has fallen from around half in 1945 to 26% today, the dollar still
accounts for 58%
of global central-bank reserves. If US tariffs and sanctions trigger a major
move away from the US dollar as the dominant international transaction vehicle,
that, too, would undermine the multilateral trading system, because exporters
have proven unwilling to stockpile alternative foreign currencies.
The dollar’s
nearest competitor, the euro, at 20%
of global reserves, has its upside capped by the absence of a unified
sovereign debt market and long-term concerns about its survival. And despite
China’s stated ambition of internationalizing its currency, the renminbi has
been stuck at around
2% of
global reserves for many years. China’s capital-account controls, small
sovereign-debt market, poor legal environment for foreign investment, and
unwillingness to run trade deficits disqualify the renminbi from playing any
major international role.
So, to the
extent that countries choose to trade with each other using their own
currencies – rather than with the dollar – they will necessarily seek to
balance trade bilaterally in order to avoid foreign-currency accumulation. But
this would amount to barter, not multilateral trade, which is premised on the
universal incentive to buy the best products at the lowest cost, regardless of
nationality. That incentive, in turn, will not operate without countries’
willingness to run bilateral surpluses and deficits, accommodation of which is
uniquely provided by the dollar. (The irony of the discussion within the BRICS
grouping of major emerging economies about the creation of alternatives to the
dollar is that they are seeking to avoid precisely the sort of financial
punishments that Trump has threatened to impose on them if they proceed.)
The effect of
Trump’s wayward tariffs, together with his ongoing threat of further tariffs,
refusal to confirm WTO appellate judges, and repeated invocation of “national
security” to cloak mercantilism, is likely to erode in the coming years global
trade norms that were built up over eight decades. The result will be higher
prices, less innovation, lower living standards, and greater geopolitical friction.
To be sure,
this is hardly the fault of one man, or one country. China’s escalating
mercantilism and diplomatic belligerence over the past ten years – made all the
more significant by the growing weight of its economy – virtually guaranteed a
popular backlash in the US. It is striking to recall how, just nine years ago,
the Obama administration finalized a landmark trade deal, the Trans-Pacific
Partnership, with 11 Pacific-rim countries and advanced negotiations with the
European Union on a Transatlantic Trade and Investment Partnership.
Both died
with Trump’s election in 2016. Together, they would have given the US greater
influence over global trade and investment norms, making it that much more
difficult for China to flout rules on state subsidies, technology transfers,
and intellectual property. Instead, America has chosen to mimic China’s
visible-hand regime, bullying, threatening, and punishing adversaries and
allies alike. The result is a startling dissipation of US soft power, which is
bound to result in a world more conducive to authoritarianism.
This is a
profound and painful shock to those of us who believed that the liberal order,
for all its faults and limitations, was a blessed inheritance. A future US
administration, equipped with muscle memory of an ordered past, may well try to
restore elements of it; but, shorn of the moral authority and
resource-dominance that accompanied America’s victory in World War II, it is
difficult to see how it could succeed. With Europe still too disunited to fill the
vacuum, and China professing no universal values, a dangerous period of
Hobbesian each-against-all disorder seems inevitable.1
Writing for PS since 2011
5 Commentaries
Benn Steil is Director of
International Economics at the Council on Foreign Relations and the author,
most recently, of The World That Wasn’t: Henry Wallace
and the Fate of the American Century (Avid Reader Press/Simon &
Schuster, 2024).
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