WORLD TRADE SYSTEM IN CONSTANT TURMOIL

In early 2025, the new US administration announced a series of tariff increases in violation of its commitments in the World Trade Organization (WTO), undermining the very system of trade rules that the US had helped establish after World War II. The US actions led to many retaliatory responses of increased tariffs by trading partners including the European Union (EU). Over the next several months, the US engaged in a series of negotiations leading to so called ‘framework’ agreements with the EU and others.

            I have just published a paper with the title World System in Turmoil: Implications for the EU and Greece available in my website cmichalopoulos.com as well in the ELIAMEP website, which examines the impact of these chaotic changes in the world trading regime on the economies of the EU and Greece. The paper also considers how the world trading system will evolve in the medium to longer term and its policy implications for the EU and Greece.

            It concludes that the EU should take the lead in addressing the recent turmoil in international trade first, through the implementation of a basic set of policies to strengthen European integration and institutions as articulated by recent major studies commissioned by the EU; and second, through trade agreements between the EU and like-minded countries especially in Asia and the Pacific. These policies should help the European Union rise to the challenges created by the current turmoil and lead to a future strengthening of the WTO.

           The US should be approached only after there is a change in US attitudes and/or administration. The current one continues to create uncertainty through arbitrary and capricious changes in trade policy, almost always challenged about their constitutionality. The Washington Post (January 13, 2026) reports that President Trump announced new 25% tariffs on all counties that trade with Iran. It is unclear how these new tariffs affect existing agreements or relations between the US and its trading partners.