A year marked by volatile and selective use of trade policy instruments has reshaped the global trade landscape. The return of unilateralism, the weakening of multilateral institutions, and the emergence of new trade alliances together signal a decisive break from the post-World Trade Organization consensus. These shifts matter because they redefine how power, predictability, and participation operate in global trade.
Reciprocal Tariffs as a New Normal
True to his campaign promise, Donald Trump announced reciprocal tariffs on what was termed “Liberation Day,” barely months after assuming office. Despite exemptions and sector-specific modifications, these tariffs were implemented by August. While the President’s authority to impose such measures has been challenged before the United States Supreme Court, their persistence reflects a broader acceptance of unilateral trade action.
Notably, some existing trade agreements — such as those between the US and South Korea — now contain safeguards against substitute tariffs under provisions like Section 232, signalling an expectation that unilateralism may endure. Contrary to initial fears, widespread retaliation has been limited so far, though Mexico’s recent announcement of steep tariffs on imports from non-free trade agreement Asian partners could trigger a new cycle of retaliatory measures.
Multilateral Paralysis and the WTO’s Silence
The limited pushback against US actions has exposed the diminished authority of the World Trade Organization. Despite its mandate to uphold fair and rules-based trade, the WTO has remained largely a bystander. This institutional inertia has emboldened countries to pursue unilateral or selective trade actions outside the multilateral framework, weakening global dispute resolution mechanisms.
Trade Deals Without Stability
The US has simultaneously redefined the nature of trade agreements themselves. Bilateral deals concluded through executive orders have been largely non-reciprocal and legally non-binding. Tariff reductions by the US have been tied to partner commitments extending beyond trade, including strategic and regulatory concessions.
This approach has led to repeated cycles of agreement and breakdown. The US–China trade framework, after multiple failed starts in Geneva and London, was finalised only in October, offering temporary tariff relief in exchange for China easing export controls on rare earth elements and committing to agricultural purchases. Crucially, these concessions are time-bound, underscoring the fragility and unpredictability of such arrangements. Similar uncertainties have plagued US deals with Japan and the European Union, particularly over tariff stacking and regulatory disputes involving technology firms.
Pax Silica and the Weaponisation of Supply Chains
Global value chain diversification gained urgency following China’s phased export restrictions on rare earth elements and related technologies. Given China’s dominance in rare earth processing, these measures severely disrupted US defence, energy, and automobile industries.
In response, the US has launched “Pax Silica,” a strategic alliance with trusted partners such as Japan, South Korea, the Netherlands, the UK, Australia, and others. The aim is to secure critical supply chains from minerals to semiconductors and advanced artificial intelligence. This initiative has effectively sidelined the Biden-era Indo-Pacific Economic Framework supply chain agreement, highlighting a shift from inclusive frameworks to selective strategic blocs.
China’s Export Strength Amid Barriers
Despite facing overlapping tariffs, technology restrictions, and domestic economic challenges, China remains the world’s largest exporter. Data from the first eleven months of 2025 shows a growing share of high-tech, AI-driven, and sustainability-linked products in its export basket.
The Association of Southeast Asian Nations (ASEAN) has emerged as China’s largest export destination, also serving as a key trans-shipment route to the US. Weakly enforced rules of origin have diluted the effectiveness of high tariffs imposed by the US, allowing rerouted Chinese goods to enter via third countries. Mexico’s planned tariff hike may partially disrupt this channel, though CPTPP members like Vietnam remain insulated.
CPTPP’s Rising Relevance
As the WTO’s relevance wanes, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is increasingly seen as an alternative platform for rules-based trade. Its membership is expanding, with accession processes underway for Uruguay and planned for Indonesia, the Philippines, and the UAE.
Recent trade and investment dialogues between the CPTPP, ASEAN, and the EU point to possible convergence between high-standard trade blocs. Shared “WTO-plus” commitments and flexible rules of origin could strengthen global value chain integration and resilience, offering a partial counterweight to unilateral trade shocks.
What to note for Prelims?
- Reciprocal tariffs have re-emerged as a key US trade policy tool.
- WTO’s dispute settlement role has weakened significantly.
- CPTPP is expanding amid declining multilateralism.
What to note for Mains?
- Analyse how unilateral trade measures challenge the multilateral trading system.
- Discuss the implications of supply chain weaponisation for global economic stability.
- Evaluate the role of mega-regional trade agreements like CPTPP in shaping future trade rules.
In a world of persistent trade uncertainty, the challenge before the global community is not to mirror unilateralism, but to forge cooperative alternatives capable of restoring stability, predictability, and fairness to global trade governance.
