| The second Trump administration is attempting to rewire the global trading system, and rushing to deliver trade deals ahead of its self-imposed July 9 deadline. But will the deals struck by the White House last? It’s hard enough to predict what trade policy will be next week, but I asked three experts what the global trading system will look like once Trump has departed the political scene. Will the world return to something like its pre-Trump trade rules, or are we in a new era? Their answers varied, but together they suggest four possible scenarios. Which we end up with depends on two factors: The first is whether the US decides to maintain a more protectionist and isolationist posture, or whether it seeks to repair its trading relationships. The second is whether the rest of the world recommits to the global rules outlined by the World Trade Organization, or whether countries retreat into geopolitical blocs. In the first scenario, the US opts to reengage and to remove trade barriers, and recommits to following WTO rules. “The best advice for designing a world trading system for the twenty-first century… [is] Britain’s now-ubiquitous wartime slogan from World War II: Keep calm and carry on,” wrote trade economist Robert Staiger in his 2022 book A World Trading System for the Twenty-First Century. In this scenario, both the US and the world take his advice. “We’ve done something bad to ourselves for no reason,” says Kimberly Clausing, a senior fellow at the Peterson Institute for International Economics, of the current trade war. It’s possible, she says, that the US comes to appreciate the benefits of the trading system that it created — especially if tariffs cause significant inflation or a recession. Possible, but not necessarily likely. “What’s happening is something that is bigger than Trump,” says Staiger. “The US is backing away from support for a rules-based trading system that it helped create,” he says — a process that Trump put on steroids but that he believes began as early as the Obama administration, which declined to reappoint judges to the WTO’s dispute resolution board. The next US president is unlikely, whatever their party, to unilaterally remove all of Trump’s tariffs, says Josh Lipsky, senior director at the Atlantic Council’s GeoEconomics Center, a think tank. (I was previously an editor at the Center.) “We are in a more protectionist US environment,” he says, and that’s unlikely to change anytime soon. If the US maintains a more protectionist stance, the rest of the world could still opt to stick with the global trading rules, Clausing and Staiger both say. This is roughly the scenario that economist Paul Krugman dubbed “World Order, Minus One” in a recent podcast. The biggest challenge here is China, which Clausing says “has an opportunity to be the grownup, to be a little more rules-based” and to gain other countries’ trust by recommitting to the WTO. But that’s not likely either, says Lipsky. “Most countries are working through various stages of grief over the end of the global trading system and many are moving past the initial denial and moving into acceptance,” he says. He sees global trade dividing into geopolitical blocs. If the US reengages, that could mean a revitalized G-7 leading trade negotiations — perhaps outside the WTO’s auspices and likely with particular attention to technology and to countering China. In the fourth scenario, where the US withdraws and even the EU decides to give up on the WTO, the EU could join with allies like Canada, Australia, Mexico, South Korea and Japan to forge a new trading bloc — call it EU+. In such a scenario, trade would flow easily within blocs but not between them. The EU+ would be rivaled by the similarly-sized BRICS+, led by China. And then the third bloc would be the US — still a quarter of global GDP on its own. When I raised this scenario with Staiger, he pointed me to a Krugman paper from 1989. It models the effects of regional trading blocs, and finds that the worst possible outcome is to have precisely three. — Walter Frick, Bloomberg Weekend | 
