In a powerful speech at the World Economic Forum (WEF) last week, Canada’s Prime Minister Mark Carney said, “First it means naming reality. Stop invoking ‘rules-based international order’ as though it still functions as advertised. Call it what it is: a system of intensifying great power rivalry where the most powerful pursue their interests using economic integration as a weapon of coercion.”¹

He went on to articulate various ways that middle powers, like Canada, will need to better respond to the changing economic and political realities of the day. This includes building diversified relationships and reducing the available levers for economic coercion by others.

Carney was not the first person to highlight the growing disconnect between the idealized world that has been a bedrock of political, economic, and security integration for more than eight decades and the messy reality now. But his words of warning, issued clearly and starkly, resonated because they were spoken at a time of increasing threats, culminating just ahead of the Davos meetings in mid-January, of new US tariff applications and even a potential invasion of allied territory.²

The return to a world of great power rivalry presents serious challenges. The Athenian historian and general Thucydides warned more than two centuries ago that the strong will do what they can, and the weak will suffer what they must. Carney highlighted the “strong tendency for countries to go along to get along. To accommodate. To avoid trouble. To hope that compliance will buy safety.”

Those strategies were clearly followed by much of the world in 2025. Faced with growing threats from an emboldened United States, led again by Donald Trump, including sharp and sustained rising tariffs and regulatory changes, “weaker” countries capitulated and signed lopsided bilateral arrangements designed to buy time and limit the damage.

But economic threats and punishment are not contained by capitulation. To pick just one example, Trump threatened new tariffs on France in January over its efforts to defend Greenland and over the refusal of its president to join Trump’s new “Board of Peace.” The former included a 10% tariff to be imposed on 1 February, rising to 25% on 1 June if Greenland was not handed over to the United States. The latter could result in 200% tariffs on French alcohol like champagne.

Neither threat has materialized so far. Yet the larger point remains — France already had an “agreement” negotiated with the United States meant to cap US tariffs at 15%. If the existence of trade deals fails to constrain future threats of new economic punishment, the value of having an agreement in place falls towards zero.

This suggests that, after spending much of the past 12 months looking for accommodation with an increasingly demanding United States, 2026 will be a year of consequences. Governments will seek ways to better respond and coordinate. The process of creating a new trade and economic order will not be fast. It will not come without pain.

There are four areas related to trade worth watching for signs of how the globe will respond to the end of the rules-based order: what Trump and the United States do, what China does, what others do in response to pressures from the largest economies, and how others manage cooperation with one another.

First, as much as it might feel good to simply ignore Trump for the rest of the year, he will continue to create extreme pressure. He loves tariffs. He enjoys creating drama. He likes upsetting the status quo. He has surrounded himself with aides that will go along with his every whim.³ Trump and company prefer working one-on-one with individual countries because the United States has greater power and resources over them singly than they might against a larger and more united group.

These conditions mean that the United States will engage in various types of economic coercion. Trump’s trade disruption will continue, even if the Supreme Court ultimately decides to overturn his most important tariff lever, the International Emergency Economic Powers Act (IEEPA). Trump’s team, including US Trade Representative Jamison Greer, has already signaled an intention to switch to other forms of tariff threats and to escalate the pursuit of US interests as they imagine it.⁴

Compared to Trump’s antics, the actions of the other major economic power, China, will likely seem more restrained in 2026, extending a trend begun since Trump took office. There are a few areas of trade worth watching.

China is this year’s host of the Asia-Pacific Economic Cooperation (APEC). The great power rivalry will make it difficult to get much accomplished in 2026 as the US and China tussle over outcomes. China will try to focus its efforts on digital trade issues. It will also continue to press for climate-friendly policies and the encouragement of green technologies across the 21 APEC member economies, which includes the US, as a key path to mitigate the damage done by a warming planet.

Yet China itself has a history of trade weaponization. China may be increasingly bold in its efforts to influence policy actions by trade partners. For example, China has urged Australia’s Anti-Dumping Commission to refrain from what it called a “misuse of trade remedy measures” related to steel and iron ore.⁵ In spite of the challenges ahead, there is likely to be a line of foreign leaders looking to China for new bilateral or regional cooperation activities in 2026.

China’s success in expanding exports, reaching a trade surplus of more than US$1 trillion in 2025, has sparked growing alarm in markets around the world.⁶ The rebalancing of China’s domestic economy to include greater domestic consumption will be a slow process. Given the importance of keeping Chinese factories humming, expect difficult discussions with trade partners to persist in the year ahead.

The third area to watch in 2026 is the reaction of others to the activities of the great powers. Europe felt the full blast of the challenge in Davos. While Trump ultimately did not impose tariffs on eight European countries for rebuffing his attempt to seize Denmark’s autonomous and self-governing territory of Greenland, he and his team spent much of the week belittling and dismissing the continent. Complete decoupling from the United States will be difficult, particularly with an ongoing conflict in Ukraine that requires security cooperation. A shift in defense spending away from American goods and services will take time, but will likely start accelerating in the year ahead.

It will also be worth watching how Europe decides to manage a list of retaliatory tariffs as well as its further preparations for use of the European Union’s Anti-Coercion Instrument (ACI).⁷ European governments are also likely to consider a range of additional actions such as adjustments to licensing for American firms in areas like cryptocurrencies or possible weaponization of shipping lines.

Talks between the United States, Canada, and Mexico set for mid-2026 to review their US-Mexico-Canada Agreement (USMCA) were already likely to be fraught. Recent events suggest even more difficulties ahead. Trump responded, in fact, to Carney’s speech by threatening an additional 100% tariffs against Canada if the country proceeds with a deal with China.⁸

Trump said he would withdraw from the trilateral trade agreement with Canada and Mexico in his first term before landing on a renegotiated outcome. Expect similar actions this time, perhaps leading to a pair of bilateral trade arrangements instead of a three-way integrated market.

Finally, Carney’s speech was an important call to middle powers to work collaboratively. That is much easier said than done. There are at least four important trade milestones that will show whether countries are picking up the advice.

First, the World Trade Organization (WTO) has a ministerial meeting scheduled for March in Cameroon. The agenda is meant to be all about reform. At this point, it is an open question whether members will manage to accomplish much of anything at all. If the old world order is gone, WTO participants will have to get past old, tired arguments and show willingness to embrace new approaches. This includes recognizing agreements that have less than the full WTO membership — the standing practice is to interpret any WTO agreement as legitimate only when signed off by the full membership — and moving ahead with new plurilateral talks. Signs are not promising and time is short.

Second, governments are accelerating progress towards signing free trade agreements without the US. This includes, for example, the EU and India, who are set to conclude talks this week. Existing trade agreements, like the Regional Comprehensive Economic Partnership (RCEP), are preparing for a review and potential upgrade of existing commitments in the coming year.

Third, there is increasing enthusiasm for collaboration built around the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) platform, including with the EU and with members of the Association of Southeast Asian Nations (ASEAN). While these actions are to be welcomed, the institutional structure of the CPTPP is going to struggle to deliver concrete actions in 2026. Vietnam is currently serving as Chair with a long and growing list of action items, including managing accessions and upgrading existing commitments.

Finally, there is a group of smaller powers that has already been launched. The Future of Investment and Trade Partnership (FIT-P), a coalition of 16 smaller economies convened by Singapore, New Zealand, Switzerland, and the United Arab Emirates, is meant to demonstrate progress in 2026.⁹ The grouping appears to be exactly what Carney suggested is important — a platform for cooperation and collaboration among groups of like-minded partners. But note that Canada is not (yet) part of the FIT-P process. Australia and the UK are still unsure if they will join. Such decisions highlight the difficulties of moving from ideas to actions.

Recognizing that existing practices are no longer suitable for purpose is an important first step in figuring out how to reconfigure trade and economic arrangements for the future. It is not necessary to completely toss out all the old structures, but it is critical that governments rethink their existing positions and exhibit flexibility. The path ahead is not going to be easy or fast. But 2026 should yield the first clues about what the near future will hold as the world shifts from accommodation to consequences.