The End of Multilateralism? Rising Regional Trade Agreements, Trade Wars, and The Future of the International Trading System
Abstract
The multilateral trading system faces an existential crisis driven by three mutually reinforcing dynamics: the structural failings and deliberate paralysis of the World Trade Organization (WTO), most acutely manifested in the Appellate Body's incapacitation since December 2019; the exponential proliferation of regional trade agreements (RTAs); and two waves of unprecedented trade wars under the Trump administration in 2018–2020 and 2025–2026. While substantial scholarship addresses each phenomenon in isolation, no existing study integrates the three within a single comparative analytical framework that also encompasses the second Trump trade war and the February 2026 US Supreme Court ruling on the IEEPA tariffs. This study fills that gap through an integrated comparative analytical framework drawing on terms-of-trade theory, the deep-agreements literature, and the welfare economics of trade wars. The analysis is supported by quantitative tariff series, comparative tables of the two trade wars and three governance scenarios, and a focused case study of critical mineral and technology export controls. Four conclusions follow: the WTO crisis is structural rather than cyclical; RTA welfare effects depend on agreement depth, not on regionalism per se; a tiered architecture combining deep RTAs, a residual WTO baseline, and bilateral managed trade is the most plausible trajectory; and critical mineral and technology export controls constitute an emerging governance gap that no existing framework adequately disciplines.
Downloads
PlumX Statistics
References
Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The impact of the 2018 tariffs on prices and welfare. Journal of Economic Perspectives, 33(4), 187–210. https://doi.org/10.1257/jep.33.4.187
Amiti, M., Redding, S. J., & Weinstein, D. E. (2020). Who's paying for the US tariffs? A longer-term perspective. AEA Papers and Proceedings, 110, 541–546. https://doi.org/10.1257/pandp.20201018
Bagwell, K., Bown, C. P., & Staiger, R. W. (2016). Is the WTO passe? Journal of Economic Literature, 54(4), 1125–1231. https://doi.org/10.1257/jel.20151192
Bagwell, K., & Staiger, R. W. (1999). An economic theory of GATT. American Economic Review, 89(1), 215–248. https://doi.org/10.1257/aer.89.1.215
Bagwell, K., & Staiger, R. W. (2002). The economics of the world trading system. MIT Press.
Baier, S. L., & Bergstrand, J. H. (2007). Do free trade agreements actually increase members' international trade? Journal of International Economics, 71(1), 72–95. https://doi.org/10.1016/j.jinteco.2006.02.005
Baldwin, R. E. (1993). A domino theory of regionalism (NBER Working Paper No. 4465). National Bureau of Economic Research.
Baldwin, R. E. (2006). Multilateralising regionalism: Spaghetti bowls as building blocs on the path to global free trade. The World Economy, 29, 1451–1518. https://doi.org/10.1111/j.1467-9701.2006.00826.x
Baldwin, R. E. (2016). The World Trade Organization and the future of multilateralism. Journal of Economic Perspectives, 30(1), 95–116. https://doi.org/10.1257/jep.30.1.95
Bhagwati, J. N. (1991). The world trading system at risk. Princeton University Press.
Bhagwati, J. N. (1993). Regionalism and multilateralism: An overview. In J. de Melo & A. Panagariya (Eds.), New dimensions in regional integration (pp. 22–57). Cambridge University Press.
Bhagwati, J. N. (2008). Termites in the trading system: How preferential agreements undermine free trade. Oxford University Press.
Bown, C. P. (2021). The US–China trade war and Phase One Agreement. Journal of Policy Modeling, 43(4), 805–843. https://doi.org/10.1016/j.jpolmod.2021.02.009
Bown, C. P. (2022). Trump ended WTO dispute settlement. Trade remedies are needed to fix it. World Trade Review, 21(3), 312–329. https://doi.org/10.1017/S1474745622000039
Bown, C. P. (2026). Trump's tariff revenue tracker: How much is the US collecting? Which imports are hit? Peterson Institute for International Economics. https://www.piie.com/research/piie-charts/2025/trumps-tariff-revenue-tracker
Bown, C. P., & Hillman, J. A. (2019). WTO'ing a resolution to the China subsidy problem (Working Paper WP19-17). Peterson Institute for International Economics.
Bown, C. P., & Keynes, S. (2020). Why Trump shot the sheriffs: The end of WTO dispute settlement 1.0. Journal of Policy Modeling, 42(4), 799–819. https://doi.org/10.1016/j.jpolmod.2020.03.006
CSIS Critical Minerals Security Program. (2026). Rare earth export restrictions one year later. Center for Strategic and International Studies. https://www.csis.org/analysis/rare-earth-export-restrictions-one-year-later
Dür, A., Baccini, L., & Elsig, M. (2014). The design of international trade agreements: Introducing a new dataset. Review of International Organizations, 9(3), 353–375. https://doi.org/10.1007/s11558-013-9179-1
Eichengreen, B., Mehl, A., & Chitu, L. (2019). Mars or Mercury? The geopolitics of international currency choice. Economic Policy, 34(98), 315–363. https://doi.org/10.1093/epolic/eiz005
Fajgelbaum, P. D., Goldberg, P. K., Kennedy, P. J., & Khandelwal, A. K. (2020). The return to protectionism. Quarterly Journal of Economics, 135(1), 1–55. https://doi.org/10.1093/qje/qjz036
Fajgelbaum, P. D., Goldberg, P. K., Kennedy, P. J., Khandelwal, A. K., & Taglioni, D. (2024). The US–China trade war and global reallocations. American Economic Review: Insights, 6(2), 295–312.
Fajgelbaum, P. D., & Khandelwal, A. K. (2022). The economic impacts of the US–China trade war. Annual Review of Economics, 14, 205–228. https://doi.org/10.1146/annurev-economics-051420-110410
Federal Reserve Bank of New York. (2026). Who is paying for the 2025 US tariffs? Liberty Street Economics. https://libertystreeteconomics.newyorkfed.org
Fernandez, R., & Portes, J. (1998). Returns to regionalism: An analysis of nontraditional gains from regional trade agreements. World Bank Economic Review, 12(2), 197–220.
Freund, C., & Ornelas, E. (2010). Regional trade agreements. Annual Review of Economics, 2(1), 139–166. https://doi.org/10.1146/annurev.economics.102308.124455
Grossman, G. M., & Helpman, E. (1995). The politics of free-trade agreements. American Economic Review, 85(4), 667–690.
Handley, K., & Limao, N. (2017). Policy uncertainty, trade, and welfare: Theory and evidence for China and the United States. American Economic Review, 107(9), 2731–2783. https://doi.org/10.1257/aer.20141419
Hoekman, B. M., & Mavroidis, P. C. (2015). World Trade Organization (WTO): Law, economics, and politics (2nd ed.). Routledge.
Hoekman, B. M., & Mavroidis, P. C. (2020). To AB or not to AB? Dispute settlement in WTO reform. Journal of International Economic Law, 23(3), 703–722. https://doi.org/10.1093/jiel/jgaa020
Hoffmann, J., Osnago, A., & Ruta, M. (2019). The content of preferential trade agreements. The World Economy, 42(5), 1533–1584. https://doi.org/10.1111/twec.12690
Horn, H., Mavroidis, P. C., & Sapir, A. (2010). Beyond the WTO? An anatomy of EU and US preferential trade agreements. The World Economy, 33(11), 1565–1588. https://doi.org/10.1111/j.1467-9701.2010.01273.x
Howse, R., & Langille, J. (2023). Continuity and change in the World Trade Organization: Pluralism past, present, and future. American Journal of International Law, 117(1), 1–47.
Karacaovalı, B., & Limao, N. (2008). The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union. Journal of International Economics, 74(2), 299–327.
Kohl, T., Brakman, S., & Garretsen, H. (2016). Do trade agreements stimulate international trade differently? Evidence from 296 trade agreements. The World Economy, 39(1), 97–131.
Limao, N. (2006). Preferential trade agreements as stumbling blocks for multilateral trade liberalization: Evidence for the United States. American Economic Review, 96(3), 896–914. https://doi.org/10.1257/aer.96.3.896
Mansfield, E. D., & Reinhardt, E. (2003). Multilateral determinants of regionalism: The effects of GATT/WTO on the formation of preferential trading arrangements. International Organization, 57(4), 829–862.
Mattoo, A., Mulabdic, A., & Ruta, M. (2022). Trade creation and trade diversion in deep agreements. Canadian Journal of Economics, 55(3), 1598–1637. https://doi.org/10.1111/caje.12611
Mattoo, A., & Staiger, R. W. (2020). Trade wars: What do they mean? Why are they happening now? What are the costs? Economic Policy, 35(103), 561–584. https://doi.org/10.1093/epolic/eiaa013
McKibbin, W., Noland, M., & Shuetrim, G. (2025). The global economic effects of Trump's 2025 tariffs (PIIE Working Paper 25-13). Peterson Institute for International Economics.
Miranda, J., & Sanchez Miranda, M. (2023). Chronicle of a crisis foretold: How the WTO Appellate Body drove itself into a corner. Journal of International Economic Law, 26(3), 435–461. https://doi.org/10.1093/jiel/jgad023
Rodriguez-Clare, A., Ulate, M., & Vasquez, J. P. (2025). The 2025 trade war: Dynamic impacts across US states and the global economy (NBER Working Paper No. 33792). National Bureau of Economic Research.
Rodrik, D. (2018). What do trade agreements really do? Journal of Economic Perspectives, 32(2), 73–90. https://doi.org/10.1257/jep.32.2.73
Shaffer, G. (2019). A tragedy in the making? The decline of law and the return of power in international trade relations. Yale Journal of International Law Online, 44, 37–50.
US Bureau of Industry and Security. (2025). Affiliates Rule and Entity List expansions, September 2025. Federal Register.
US Congressional Research Service. (2025). US export controls and China: Advanced semiconductors (CRS Report R48642).
Viner, J. (1950). The customs union issue. Carnegie Endowment for International Peace.
Waugh, M. (2024). The average effective tariff rate (Economic Brief No. 25-12). Federal Reserve Bank of Richmond.
World Trade Organization. (2011). World Trade Report 2011: The WTO and preferential trade agreements — From co-existence to coherence. WTO Publications.
World Trade Organization. (2020). United States — Tariff measures on certain goods from China (DS543): Panel report WT/DS543/R.
World Trade Organization. (2022). United States — Certain measures on steel and aluminium products (DS544): Panel report WT/DS544/R.
World Trade Organization. (2024). Regional Trade Agreements Information System (RTAIS). https://rtais.wto.org/
Yale Budget Lab. (2025). Where we stand: The fiscal, economic, and distributional effects of all US tariffs enacted in 2025 through April 2. Yale University. https://budgetlab.yale.edu
Copyright (c) 2026 Derya Hekim
This work is licensed under a Creative Commons Attribution 4.0 International License.
