U.S. President Donald Trump’s tariffs and subsequent trade wars have increased the risks of recessions in many countries, including the U.S. and China. They also damage the orderly international trade system built over the past eight decades. The World Trade Organization (WTO), which serves as a forum for multilateral trade negotiations and an arbiter for trade disputes, has been sidelined, as the U.S. pursues bilateral trade negotiations with countries like Japan and the U.K. and is now negotiating with China. These trade wars and ensuing bilateral deals are replacing the WTO’s trade dispute settlement mechanism. These developments have created risks and uncertainties, as evidenced by the volatility of global stock markets.
World trade and economic progress must be protected from disorderly, power-driven trade deals and the economic uncertainties they create. World trade relations have evolved into the most orderly international system, with the highest level of cooperation among 166 WTO members. All countries have benefited from these predictable and orderly trade relations, enabling international trade growth to outpace global economic growth since the 1950s. If world trade shrinks, all economies will suffer as their exports decline, global chains break down and production efficiency is lost.
Thus, it is in every country’s interest to restore the international trade system and preserve its orderliness and predictability. It is clear that the trade system has led to persistent trade deficits for some countries, particularly the U.S. Moreover, international trade causes inefficient sectors to decline while competitive, efficient sectors thrive. Consequently, some sectors lose while others prosper in every economy. This creates political battles within countries between losing import-competing sectors and gaining export-oriented sectors, as well as among countries. Trump rose to power with support from losing sectors and groups, such as low-skilled labor. In other countries, too, the political influence of losing sectors is growing. This suggests that the international trade system can be restored through reforms addressing persistent trade deficits and the concerns of rapidly declining sectors. This can be achieved by enabling governments to temporarily protect these sectors and provide adjustment assistance to help them transition to competitive industries.
Although the U.S. has successfully completed bilateral agreements with Japan and the U.K. and may do so with others, the orderly international trade system should not be sacrificed for fragmented bilateral agreements. Ultimately, the multilateral international trade agreement must be updated to address current trade challenges. However, the WTO’s difficulty in reaching a new agreement among 166 members, as shown by the failure of the 14-year Doha Development Round negotiations (2001-2015), proves this is a challenge. Negotiating with fewer countries may be easier. Thus, the G-20, with 20 countries representing 80% of the world economy, may be the best platform for addressing global trade challenges.
The G-20 and its predecessor, the G-7, have traditionally brought top economies together to discuss global economic issues, including trade and coordinating policies to overcome crises. Over time, G-7 and G-20 discussions have expanded to include global problems like the environment and immigration. The challenges facing world economies today align perfectly with the G-20’s agenda. The G-20 has a proven track record, successfully addressing economic issues during the 2007-2009 Great Recession and the 2020-2022 COVID-19 period. The current trade war issues should be a priority at the G-20 meeting in Johannesburg in November 2025, and the G-20 should consider an earlier emergency meeting.
However, the G-20 includes the U.S. and China, which remain in a trade war, despite recent news of ongoing negotiations. As the world’s two largest economies, their unwillingness to compromise could prevent the G-20 from making effective decisions. Moreover, G-20 decisions are nonbinding and suggestive. If top economies recognize their shared interest in resolving the world trade system’s challenges and reach a compromise, it could advance reforms to the WTO and the global trade system. Achieving this goal would stimulate global economic growth, with positive ripple effects benefiting all countries. In the current trade war environment, this may seem wishful, but no platform is better suited than the G-20 to address these challenging trade and economic issues.