The National Interest
A New World Order of Tariffs
Cliff Kupchan & Robert Kahn - August 7, 2025
Tomorrow, President Donald J. Trump is set to implement tariff hikes on a wide range of countries. The world seems irreversibly headed toward a different and less stable order. The Trump tariffs and retrenchment from the international economy will outlast this administration—regardless of the outcome of the 2028 presidential election. Looking ahead to the next decade, US tariffs and broader industrial policies, including tax breaks and subsidies, will continue to underpin trade policy. Support for tariffs exists not only among MAGA Republicans but also among many Democrats, especially in the growing progressive wing of the party.
Due to its geopolitical influence and market size, the United States will continue to set the tone of the international system. Diminished trade and efficiency, higher inflation, and increased national self-reliance will characterize the system. In addition, regional groupings—arising from great power influence, proximity, and lower trade costs—will become relatively more important vehicles for trade. The role of the dollar will gradually diminish, both in settlements and as a reserve currency. Lastly, a growing group of nations in the Global South will play a crucial role in the new system.
The Free-Trade System Is Dead
The current system is dead. The United States won’t lead it anymore, and neither China nor any other nation will takecontrol of it. This leaves two possible scenarios: the United States joins a group of democracies (the G7) to form a trading bloc, or—more likely—a tariff-based system will emerge that lacks strong coordinating institutions.
The United States won’t lead or maintain a system based on free trade. Increasing numbers of Americans—especially younger Americans—do not favor the activist foreign policy that sustains it. Multiple polls show that. A significant dose of Trump’s retrenchment will endure regardless of who is elected next. Moreover, the MAGA movement is now an indigenous feature of the US political system. Recent polling suggests 49 percent of Republican voters and nearly one-sixth of adults identify as MAGA. Surely some of that is loyalty to Trump’s personal brand alone, but loyalty to the MAGA policy agenda is also important. Trumpism will survive Trump.
The key to Trump’s electoral coalition is his gains among blue-collar white voters, including union members. This group supports tariffs that protect the industries in which its members work. Formerly part of the Democratic base, this cohort is the single most sought-after demographic in US presidential elections. Consequently, tariffs are likely to remain a feature of US policy for the foreseeable future.
Retrenchment or relative isolationism is more profound on the MAGA right. Still, it’s also present and growing among the progressive Left—and that’s where the energy is in the Democratic Party. This is primarily an extension of Senator Bernie Sanders’ (D-VT) presidential primary campaigns in 2016 and 2020, which pledged to elevate living standards for the working class.
The next generation of leaders, exemplified by Rep. Alexandria Ocasio-Cortez (D-NY) and Zohran Mamdani, has increased momentum and excitement within the movement. There also appears to be increased white-collar participation—driven by middle and upper-class voters who strongly oppose the Trump administration. This progressive Left also favors tariffs, albeit to a lesser extent, and certainly not with the Trump administration’s penchant for unpredictability.
Related, the terms “free trade” and “FTA” (free trade agreement) are dinosaurs in DC. Most members of Congress support some version of “fair trade” (code for “protectionism”) instead. There has not been a new multilateral free trade agreement involving the United States since NAFTA in 1994; its replacement, the USMCA, was mostly a tweak of that agreement.
Lastly, the Trump tariffs will be sticky. Tariffs quickly develop powerful constituencies comprised of protected industries. US steel companies are already a constituency for the new tariffs as they are now able to increase prices. President Joe Biden did not ease the first Trump administration’s China tariffs—even though he was not a fan of the measures. This reflected support for the tariffs from traditional Democratic Party constituencies, notably labor unions, as well as the political cost of being perceived as weak on China. Trump’s tariffs will outlive his presidency, regardless of who succeeds him.
The United States will continue to flip-flop its policies depending on which party controls the White House, but tariff-based industrial policy will be less affected. A Democratic president would be more open to multilateral forums and policymaking, which are qualitatively different from unilateral tariff policies. But competition for blue-collar voters and broad support within the Party for industrial policy would prevent a significant reversal by Democrats.
A Leaderless Global Trade System
If the United States does not lead a free trade order, no other country will take up the mantle. China is currently casting itself as the new leader on free trade, globalization, and stability. Beijing is calling for a new trading system without the United States. But there are three reasons why China will not lead a new order. Public opinion of China around the world is generally negative.
China might try to lead, but few nations would follow. Second, China is not a global power; its diplomacy, at least in the Middle East and parts of Latin America, is underdeveloped. China lacks the capability to lead a global system and also the necessary willpower. Lastly, a system that excludes the United States, the world’s largest market, which accounts for roughly 30 percent of global household spending and about a quarter of global GDP, would face enormous challenges.
The EU is the only other candidate to lead a free trade system. But many EU decisions require a unanimous consensus among its 27 member states. Governance is too difficult for the organization to lead a new system.
Since neither the United States nor any other country can lead a global free-trade system, two scenarios remain possible. Either the United States leads a large bloc of relatively free-trading nations, or the world devolves into a status characterized by a lack of a large trade structure and weak regional groups. The former option could involve a tight US-led structure including the G7 nations, India, the EU, and the Gulf countries. However, this structure would be too capacious an alliance for a MAGA president. The Far Right views alliances and commitments as havens for free riders on US power and constraints on the United States’ ability to pursue its interests.
Under a Democratic president, this tack would be more possible. However, even then, it would likely require too much US leadership, commitment, and provision of public goods to appeal to a retrenchment-oriented base and public. Over the coming decade, the creation of significant new trade or geopolitical commitments by a US president is unlikely, regardless of which party controls the White House. The credibility of existing commitments will also weaken.
A System of Tariff-based Industrial Policy
Having ruled out other possible scenarios, the most likely course of action entails a tariff-based system with weak regional trading blocs. Given the current trajectory of trade talks, the effective US tariff rate on all imports at the end of this year will be on the order of 15 percent—this is broadly in line with other expert forecasts, notably those cited here. This assumes a 10–15 percent effective rate on most key US trading partners, with higher rates applied to China, India, and some smaller countries. These levels will be unprecedented since the 1930s. They will likely stick for years to come for the reasons explained above.
US policy will remain the main driver of global trade interactions over the next decade. While Trump is in office, his personality will favor impetuous and threatening policy positions to gain leverage over other countries. A Vance presidency would likely involve similar tactics since the vice president would seek to emulate his mentor. Under Rubio or another Republican candidate, the degree of confrontation and uncertainty could ease—simply because of personality differences. A Democratic successor to Trump would be far less likely to mimic his style and would bring more predictability and concern for the business environment. Still, levels of uncertainty would be far higher than in preceding decades because of the new, complex tariff regime.
The reaction of other countries to this high-tariff system would further define the new system. They would seek to avoid a new trade conflict with the United States and eschew tariff increases on US imports. Geopolitical alignment with the United States, as well as the presence or absence of non-tariff trade irritants, would also be relevant to bilateral trade relations.
Countries, especially emerging markets, would still protect national champions, nascent industries, or areas of perceived national security vulnerability. However, in a tariff-based system, the headroom to enact new tariffs in a way that does not significantly harm trade or anger the United States will be limited. Other countries’ broader industrial policies, including tax incentives and subsidies, will both be the norm and a source of tension with the US.
Lastly, some countries will react to US policy via a hedging strategy. Hedging is a defensive, risk management strategy that seeks to protect against Washington’s unreliability by developing more robust trade relations with countries other than the United States. Other countries will pursue a policy of “multi-alignment.” This is a more deliberate policy of pursuing constructive relationships with multiple powers simultaneously, rather than choosing sides. While US policy may be one reason a country chooses multi-alignment, the policy results more from a proactive view of the world than from a specific US policy. For example, India’s policy of multi-alignment long precedes the Trump administration.
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