Trade distortion and protectionism

How we should move forward in Trump’s turbulent trade world

Deborah Elms

Published 15 April 2025

With his announcement of sweeping worldwide reciprocal tariffs, Donald Trump shredded America’s commitment to the multilateral trading system. In its wake, governments that depend on open economic engagement and cooperation as a critical means to deliver growth need to act. A first step could be a coordinated statement from the CPTPP and EU, which can be followed by dialogues in other venues.

In a windy setting outside the White House on 2 April, President Trump made a series of announcements that blew away American support for globalization. Trump put "reciprocal" tariffs on every country at rates that ranged from 10% to 50%. After catastrophic reactions from markets, he then reset tariffs on 9 April at 10% for the next 90 days for everyone but China.

The pause for the so-called "reciprocal" tariffs, however, should not obscure the central global challenge: the US will not defend its historical legacy of crafting and nurturing an agenda for trade and economic integration. Instead, America will turn decisively inward as the application of punishingly high tariffs on most of the rest of the world has shown.

The speed and scale of the change caught most governments by surprise. They had survived Trump’s first presidential term with the world trade regime battered but intact. The expectations were that Trump would largely follow a similar path and be open to using tariffs to extract concessions from some countries.

Now this comforting vision has collided with the reality of an America First trade agenda. Governments everywhere are scrambling to control the damage. Some quickly dispatched delegations to Washington to open talks. Others opted to say nothing and avoid any type of escalation. A few, notably China and Canada, issued their own retaliatory measures.

What has been missing in these early days of chaos are clear, collective actions by countries. Despite common challenges, governments have largely opted to remain quiet, preferring any discussions to take place behind the scenes or in unofficial settings.

Until Trump’s 2 April announcements, watching and waiting may have been a sensible option. After all, this famously mercurial person could have opted for policies with significantly less impact or made a U-turn. Early actions by other governments could have altered the outcome in unanticipated ways, perhaps increasing the risks rather than decreasing the potential tariff and economic threats.

Now that American tariffs have been applied to the entire planet in contravention of global trade rules, with escalation to some very high levels still a possibility within 90 days, a cautious stance by the rest of the world is increasingly problematic. Whatever happens from this point forward, the shape of global trade flows will never be the same. The US is not the dominant economic force it was in the early decades following the Second World War, but it has been a large and lucrative market for global firms of all sizes. Managing disruption in trade patterns will be a challenge, even for governments that have modest overall trade flows.

One logical solution would be to turn to the institution tasked with managing global trade, the World Trade Organization (WTO). Some governments have done so, including starting discussions under dispute settlement proceedings. But this path is going to be problematic for many reasons, including the ability of the WTO to properly conduct such proceedings and of the United States to either block or ignore any outcomes it does not like.

Hence, it is increasingly important for governments to start thinking outside the box and get ready to move quickly. Fast decision-making and coordination are not the natural strength of governments, which tend to have internal systems and processes that are particularly ill-suited to rapidly changing conditions. However, the global experience of the Covid-19 pandemic might be a reminder for governments to understand how they must coordinate quickly in crisis situations.

This is one of those times. The start can be modest but needs to happen as soon as possible. Because coordination across large groups of diverse members will take time, governments should instead focus on creating smaller groupings of alignment and building out concentric circles of cooperation over time.

The fastest way to build consensus is to start with existing institutions or organizations and aim for an achievable outcome. The 12 members of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) combined with the 27 members in the European Union provide an obvious platform. In fact, the Prime Minister of New Zealand, Christopher Luxon, announced in a press conference on 9 April that he was starting just such a process of cooperation.¹ EU President Ursula von der Leyen expressed interest in exploring the idea further in a bilateral call on 10 April.²

CPTPP-EU cooperation, in the first steps, should not be about the development of a free trade agreement. Instead, it should start with a very important but limited statement. This should include at least four key points:

Trade matters, as a vital underpinning to the growth and prosperity of every CPTPP and EU member;
Open trade and cooperation remain critical to support future economic growth;
CPTPP and EU member states agree not to impose protectionist measures against one another, particularly tariffs within the grouping; and
Members pledge to begin a process to develop trade practices suitable for 2025 and beyond.

Crafting and releasing such a statement should be quickly achievable for these two groupings that have been built precisely on such principles.³ The statement should be made available for other non-members to join.

Building momentum for managing global and regional trade in new ways will take more time. The world has clearly changed and old, tired talking points need to be retired. Not everything, of course, in the global trade regime requires adjustment, so dialogue will be needed to sort out what is still fit-for-purpose, what should perhaps be jettisoned, and what new ideas should be brought to the table.

These conversations cannot and should not take place only within the CPTPP and the EU members. In addition to dialogue within the WTO, other groupings should undertake similar types of exercises. For example, the Association of Southeast Asian Nations (ASEAN) Economic Ministers held an emergency meeting last week to discuss the specific issue of US tariffs.⁴

Other trade or economic groupings, including PACER Plus (Pacific Agreement on Closer Economic Relations Plus) with 10 members in the Pacific and the African Continental Free Trade Area comprising nearly all of Africa, will also be critically important as locations for a renewed dialogue on managing trade and economic relations.

The broader point is that Trump’s Rose Garden launch of "reciprocal" tariffs laid bare these rapidly changing economic conditions. In this new environment, business-as-usual responses will not be sufficient. Governments should be seizing opportunities in whatever settings make sense to start discussions on the future, starting with a bold defense of economic cooperation and engagement from the CPTPP and EU – together.

Download the article as a PDF.

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[1] Beginning with Australia, see https://www.reuters.com/world/asia-pacific/new-zealand-pm-prepares-speak-world-leaders-buttressing-free-trade-2025-04-09/
[2] https://ec.europa.eu/commission/presscorner/detail/en/read_25_1030
[3] See also Tim Groser’s suggestion from the Friends of Multilateralism Group at https://www.youtube.com/watch?v=D1CoLpRzG0c
[4] https://asean.org/wp-content/uploads/2025/04/04-Special-AEM-Joint-Statement-Unilateral-Tariffs-Adopted.pdf

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Author

Deborah Elms

Dr. Elms is Head of Trade Policy at the Hinrich Foundation in Singapore. Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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