The fractures in today’s global trading system have been years in the making — driven by shifting power balances, uneven economic benefits, and the erosion of trust in the rules-based order.

At the center of this tension is the US-China rivalry. China’s rapid economic rise has sparked concerns over intellectual property protection, state-driven industrial policy, and overcapacity in sectors such as steel and solar. The United States, meanwhile, faces the hollowing out of its industrial base and mounting political pressure to "bring jobs home."

Security and trade are now inseparable. From the South China Sea to critical mineral supply chains, to advanced semiconductors and artificial intelligence, strategic vulnerabilities have become deeply entwined with commercial policy.

In late July, while in Singapore, I joined an excellent dialogue co-hosted by the Hinrich Foundation and the Asia Pacific Foundation of Canada on the state of global trade and the upheaval that the world has been grappling with — not just in the past few months with the return of Donald Trump to the White House, but over a decade in the making. What we are witnessing today is the convergence of deep-rooted faultlines, from China’s rise and the US response to the World Trade Organization’s (WTO) paralysis to the resurgence of populism and protectionism, now amplified by geopolitics and security concerns.

The WTO’s inability to update its rules or enforce them effectively has only compounded the problem, leaving the system ill-equipped to manage today’s geopolitics-driven trade disputes. When the WTO was created in 1995, richer members like the US committed to keeping tariffs low — as low as 2%–5% — while developing countries were permitted much higher ceilings, sometimes up to 100%, to support a more even spread of global economic development. That framework helped lift hundreds of millions of people out of poverty, but over time it entrenched imbalances: some economies, including China, have become global powers while still benefiting from flexibilities designed for far poorer nations.

With no comprehensive tariff agreement in over 30 years — since the WTO’s Uruguay Round in 1994 — the rules are outdated. There is now a sense of expectation that stronger economies must take on greater responsibilities while ensuring the system continues to protect genuinely vulnerable countries. In the absence of such reform, nations are increasingly turning to tariffs, export controls, and industrial subsidies — fragmenting the global trading system.

The convergence of trade, security, and sustainability

Trade no longer stands apart from other national priorities. It now sits at the intersection of economic security, foreign policy, climate action, and technology governance.

This convergence is reshaping the questions we ask about trade policy:

Economic security: How do we secure supply chains for critical goods — semiconductors, rare earth minerals, vaccines — so they are both resilient and sovereign? This means diversifying production, building redundancy in strategic sectors, and working with trusted partners to prevent single points of failure that can be exploited in times of crisis.

Climate action: How do we align trade policy with net-zero commitments and adapt to measures like carbon border adjustments? Trade can enable clean-tech leapfrogging in regions like India and Africa, where green energy and manufacturing can bypass traditional fossil-fueled infrastructure. Africa, for instance, boasts 60% of the world’s top solar resources yet only 1% of installed capacity. Off-grid solutions like mini-grids and pay-as-you-go solar platforms are already transforming communities. The challenge is crafting trade incentives linking market access, technology transfer, and investment, so industrialized economies see a win-win outcome. Without that cooperation, great power competition risks driving a race to the bottom.

Technology governance: How do we set shared rules for data flows, AI, and digital trade to avoid costly fragmentation? Common standards on privacy, interoperability, and security are essential — not just to safeguard consumers, but to ensure that innovation thrives in a predictable and trusted environment across borders.

These are not issues that can be tackled in silos. They demand integrated transnational approaches. And in this changing landscape, it is the rule-seeking countries — from traditional middle powers like Australia, Canada, and Japan, to partners within regional groupings such as the Association of Southeast Asian Nations (ASEAN) and the European Union together with reliable partners across other continents from South America to Africa and the Middle East — that may be more important than ever in deciding what comes next.

Middle powers must lead

In today’s fractured world, these rule-seeking middle powers can serve as stabilizers. Free from the baggage of Great Power rivalries, they bring enough economic weight, policy credibility, and regional influence to steady the system. What distinguishes them is not size, but their orientation toward cooperation, predictability, and a commitment to multilateralism that gives businesses, investors, and citizens the stability they need.

They are already proving they can shape the agenda:

When Trump pulled the US out of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Australia, Canada, Japan, Mexico, Peru, Singapore, Vietnam, and other partners drove the agreement across the finish line. Since then, the CPTPP has welcomed the United Kingdom, launched negotiations with Costa Rica, and opened the door to potential EU participation — proof that middle powers can deliver and keep expanding the trade agenda.
ASEAN has built one of the world’s most extensive networks of trade agreements, including the Regional Comprehensive Economic Partnership (RCEP) while advancing negotiations with Canada and deepening engagement with the EU, showing how regional cooperation can keep trade open and inclusive, even in a fragmented global economy.

What’s next? Deepen collaboration among these coalitions and welcome new partners. Create synergies so that trade rules are not only ambitious but practical, delivering real benefits for businesses and workers alike, from trade facilitation and digital governance to the design of truly resilient supply chains.

The risk of standing still

The cost of inaction is high — it cedes ground to those who see trade as geopolitical leverage rather than shared prosperity.

If middle powers fail to act:

Global trade will fragment further as countries default to bilateral arrangements.
Supply chains become more vulnerable and politicized, weakening their resilience.
Trust in the rules-based system erodes, complicating cooperation on climate, health, and digital challenges.

Why this matters: The view from the boardroom

Businesses at the Singapore dialogue voiced a clear message: volatility is unsustainable.

Business leaders stressed the need for rules and predictability. Without them, risk escalates, costs rise, investment slows, and jobs for workers are threatened. One executive posed a simple question: If a global company has to navigate dozens of bilateral agreements, how is that supposed to work well for business in practice?

I have also learned that a new discipline — "simulation governance" — is emerging in many boardrooms. This involves scenario-planning for an array of factors that affect companies: mapping US tariffs across markets, evaluating differing emissions levy regimes or climate-linked pricing rules, factoring in Chinese export controls, and running scenario after scenario to anticipate the impact on supply chain reliability and profitability.

This is no longer just compliance — it’s core corporate strategy. And the more unpredictable the trade environment becomes, the more capital is diverted to risk management instead of innovation and growth.

As one executive put it: "Even if you must reconfigure supply chains, where do you invest to protect your strategy from disruption? With so many shifting rules, why aren’t governments making it easier to facilitate trade and giving us confidence in dispute resolution?"

For business, trade facilitation and predictable adjudication are not optional extras — they are survival tools.

The "landing zone" for global trade: Anchored in trust

The landing zone for a new, stable trading order is not yet in sight, but middle powers can and should start shaping it now, leading the way. The future should be defined not by the dominance of a single power, but by a web of interconnected, rules-based networks that actively reward predictability, cooperation, and trust.

Trade is not just the exchange of goods and services across borders. It is built on trust: trust that commitments will be honored, disputes resolved fairly, and benefits shared equitably.

If middle powers do not step in to fill the governance gap, the vacuum will be filled by actors who see trade as a lever of coercion rather than cooperation. The result would be a profound setback — not only for the global economy, but for the ability to tackle shared challenges, including the pursuit of peace.

Restoring trust will take more than speeches and communiqués. It demands rules reform, coalition-building, and a clear demonstration that national interest and global cooperation can, and must, go hand in hand.

Middle powers have both the capacity and the legitimacy to lead. The moment to act is now, before the faultlines we have inherited deepen into fractures beyond repair.