The New Trade War: Crumbling of the New World Order

Rasim Huseynov

Managing Editor of Seamless Trade and International Trade Consultant at Tevolution Ltd

Fragmenting World Economic Order in North America

The post-WWII trade order, built on multilateral cooperation and the reduction of trade barriers, is collapsing under the weight of protectionism, unilateralism, and geopolitical competition. Smithian and Ricardian trade theories served as the intellectual foundation for global economic restructuring, creating cycles of winners and losers in global trade realignments. This ongoing reshuffling of global economic power is as old as capitalism itself.

As a new economic paradigm emerges—marked by de-dollarisation, digital finance, and regionalised trade blocs—incumbent leaders face a loss of influence. In response, a segment of the global elite, described by socialist economist Yanis Varoufakis as "techno-feudalist" market fundamentalists, is seeking to preserve its wealth by shaping these transitions through engineered financial and technological models. Although capitalism gave rise to a new bourgeois class, allowing a non-hereditary merchant elite to emerge, the latest technological innovations have created a new breed of businesses. These businesses function as digital rentiers, profiting like the landlords of the metaverse, as Varoufakis describes.

Seeking both rule-maker and rule-taker status, backed by aggressive nationalism, these new elites aim to insulate themselves from accountability and regulation. The Trump-led oligarchy, rather than mitigating economic inequality, seeks to expand its wealth. The same citizens who suffered under globalisation will now be made to bear the costs of de-globalisation as well. Corporate tax avoidance and de-globalisation trends have weakened the legitimacy of trade governance, leading major powers—particularly the United States—toward a return to tariff-based economics.

Paradoxically, tariffs intended to correct trade imbalances have strengthened the U.S. dollar, making American exports even less competitive. This has forced the U.S. to backtrack on some tariff policies, yet economic nationalism remains a dominant force in trade decision-making. This shift has led to increased executive-level control over trade policy in the U.S., Canada, and Mexico, reshaping the North American trade landscape.

Additionally, analyst Ian Bremmer has observed that the United States is departing from global institutions such as the WTO, which it originally helped establish, because it no longer finds them useful. This cynical shift disregards the fact that the WTO, though imperfect, was built through the tireless efforts of the global community and represents a historic milestone in international governance. Failing to acknowledge these actions for what they truly are—unstable and arbitrary—will only erode the credibility of future U.S. trade commitments.

The North American Trade War: Fractures Within Alliances

Reliance of many countries on Preferential Free Trade Agreements (PFA) has repeatedly demonstrated the instability of alliance-led agreements. Notable examples include China-Australia and Russia-Georgia, where trade disputes have disrupted economic cooperation and exposed vulnerabilities.

The U.S.-Mexico-Canada trade relationship has become increasingly strained despite the USMCA agreement. Although the agreement was meant to stabilise North American trade, disputes over auto rules of origin, labour provisions, and environmental policies continue to create uncertainty. The U.S. president’s attempt to leverage tariffs as a bargaining tool disrupted North American supply chains, revealing the fragility of the U.S. trade system.

Recent changes in the U.S. administration triggered a swift return to chaotic protectionism.

• The Role of PFD (Policy Formulation System): Trade policy has once again shifted away from balanced institutions and interest-based scrutiny to the highest executive-presidential level decision-making, allowing leaders to bypass long-standing economic norms in favour of politically motivated strategies.

• Overreliance on U.S. Trade by Canada: Canada's heavy dependence on trade with the U.S. highlights a lack of strategic diversification. Canada's failure to build broader trade alliances demonstrates significant vulnerabilities—challenges faced by any economy with an overly concentrated trade strategy.

• Mexico’s Economic Instability and Social Crisis: While Mexico has embraced a new capitalist model, it has allowed extreme poverty and rampant crime to persist. The lack of significant control over organised crime has undermined economic stability, highlighting how social and economic problems are inherently linked.

  
  

The Global Tax Shift: Who Pays, Who Escapes?

Historically, trade taxation was tariff-based, but the modern world has increasingly relied on corporate taxation, VAT systems, and digital tax frameworks to raise government revenue, while duties were eliminated based on global consensus under WTO agreements. Trump’s attempt to revert to tariffs is effectively a second wealth transfer—after globalisation—where the rich avoid tax burdens while consumers bear the cost.

• Large corporations and financial elites have mastered tax avoidance, shifting wealth offshore and using digital loopholes and transfer pricing—a strategy viewed by some as a legitimate balancing measure and by others as a sophisticated form of disguised tax evasion.

• Trump’s plan to replace corporate taxation with across-the-board tariffs would effectively protect the ultra-rich while making imports significantly more expensive for consumers.

• Developing economies, although not directly involved in this battle among economic giants, will also fail to benefit from these developments.

• These countries, however, may reconsider granting market access—something initially offered under a post-colonial narrative influenced by the idea of "tariff-free" trade as a global good.

• As promises remain unfulfilled, developing nations are increasingly questioning their obligations under WTO rules, suggesting they may withdraw previously granted concessions to rebalance their economies.

  
  

Beyond Military Buildup: Why Global Leadership is Failing

Despite economic turmoil, world leaders continue to rely on military deterrence, fuelled by imperialist ambitions of both old and new players. Spurred by military-industrial dollars and entrenched defence establishments, they use economic coercion and aggressive trade policies rather than seeking cooperative economic solutions.

The American superpower-based model, once unrivalled, has found inspiration and competition in other emerging power centres such as Russia and China. Their increased military buildup and departure from multilateral economic systems create a recipe for future conflict.

Even within supposed trade alliances (e.g., USMCA, CPTPP, EU-Japan trade), hidden protectionist policies continue to emerge, proving the fragility of these agreements.

The Role of Society, the UK, the EU, and Other Global Powers

While superpower competition dominates global trade, societies themselves are not passive actors. Civil organisations, workers, and local economies have much to lose if trade governance becomes dictated solely by coercion and protectionism. Societies must defend the gains made through trade agreements, regulatory progress, and economic interconnectivity.

The UK, with its monarchy and historical ties, maintains significant influence in Commonwealth nations and global finance. Its post-Brexit positioning allows it to act as a bridge between the U.S., EU, and emerging markets, fostering new trade partnerships.

The European Union, though challenged by internal divisions, remains a regulatory powerhouse. Its ability to enforce trade standards, environmental regulations, and digital governance positions it as a counterbalance to coercion-based trade practices.

New actors such as Turkey and its growing Turkish Union of Turkic States are emerging as balancing forces in regional geopolitics. Turkey's deepening economic ties with Russia, China, and parts of the Global South create an alternative dynamic, making trade relations less monopolised by traditional superpowers.

Other global players, including Japan, South Korea, and Brazil, seek to establish economic partnerships that mitigate reliance on U.S.-China trade dominance. These nations explore new alliances to enhance strategic autonomy while maintaining global economic integration.

The future of global trade governance may depend on these middle powers, their ability to cooperate, and their capacity to offer an alternative to coercion-driven economic policies.