Greetings. Today is the fourth Sunday of Advent — the last before Christmas, and with it the start of the holiday break for your newsletter on the global economic policy debate. Tej and I wish you all a restful break, and we will be back to the normal twice-weekly schedule in the first full week of January. Let us know how we have done this year and what you would like us to look at in 2026 — you can reach us at freelunch@ft.com.
I’d like to finish the year by looking back at a recurring topic from 2025. Free Lunch has repeatedly asked what the global economy could look like with a US-shaped hole in it. If President Donald Trump’s America really does disengage from the global economy and the institutions that govern it — both of which Americans largely built in their own image for two generations after the second world war — what is left? Or what could be left, if other countries play the bad hand Trump has dealt them as well as possible?
The most obvious area where that question arises is trade, where we observed early on that most countries are less dependent on exports to the US than you might think, and might as well aim to become less dependent still. They should perhaps worry more about a US financial withdrawal, in the form of a weakening role for the US dollar (although for Europe that comes with opportunities the EU could grasp if it were less timid).
A less obvious area, however, is the effect on global governance. In the spring, I wrote about the potential for salvaging the global institutional framework that the US built. So today, I would like to examine how that agenda has developed this year.
In my spring piece, I highlighted two important international agreements struck during just the first few months of Trump’s second presidency: one on pandemic preparedness under the aegis of the World Health Organization and the other on taxing carbon emissions from shipping, in the International Maritime Organization. I also mentioned the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). This is the parallel dispute resolution mechanism set up by a subset of World Trade Organization members, including the EU and China, to resolve disagreements under WTO rules while the organisation’s own process is paralysed by the US’s refusal to appoint judges.
I concluded that:
What we learn from the two new treaty agreements mentioned first is that the rest of the world can keep using the international governance structures of the erstwhile US-led order to their advantage. What we learn from the MPIA case is that there are ways to replicate even the structures the US has the ability to torpedo. You may not like what comes after America — but the America we knew has left behind a pretty resilient legacy.
Over to you to insert your favourite “how it started/how it is going” meme. At least for one of those two agreements, I spoke too soon. At the same time, I did admit that “the US can do more than simply disengage; it can actively sabotage”. Almost a year into the second Trump administration, we have quite a few more examples of its effect on global governance. So let’s go through them in chronological order.
First, in April, was the IMO vote to charge a levy on carbon emissions I mentioned above. That vote, it turned out, was not the end of the story. Although a majority of member countries passed the emissions tax measure, its adoption still had to be formalised by another vote in October. By then, the US had twisted enough arms to shift the majority with unheard-of pressure such as threatening delegates’ ability to get US visas. “It’s like dealing with the mob,” as one diplomat put it.
Second, also in April, was the agreement on a binding pandemic treaty. This, too, was pending formal adoption, but in this case that formal adoption happened at the WHO’s World Health Assembly in May. The contrast between the US’s behaviour towards the WHO, which it is leaving, and the IMO, which it is not, is suggestive: the institutions of the postwar global order may well be robust to US neglect, less so to US aggression.
Third, in September, the “High Seas Treaty” achieved its threshold for ratification by 60 countries, meaning it will enter into force next month. Officially called the Biodiversity Beyond National Jurisdiction agreement, the treaty provides for protected areas at sea. The treaty had been signed in 2023 (including by the US government under the administration of Joe Biden), so one might reasonably argue that the ratifications do not say much about the conditions for global governance. But most of the ratifications happened in a few big bursts this year. Clearly, the Trump administration’s negativity about the rules-based international order has not discouraged a speedy entry into force of this treaty, at least.
Fourth, in November, Brazil hosted the COP30 climate talks. After the IMO debacle, there was a lot of nervousness about whether the US would use similarly heavy-handed tactics to scupper any commitment to address climate change. Sure enough, the final consensus agreement was seen as weak tea by many. But a group of countries formed a “coalition of the willing” vowing to work towards the phasing out of fossil fuels, a goal that did not make it into the COP30 declaration. Another example, I think, of how the rest of the world can go ahead without the US if it wants to.
Fifth, hot on the heels of COP30 was the G20 summit chaired by South Africa. Trump did not go, and the US apparently did not want others to sign a communiqué with Trump absent. The assembled leaders went ahead and issued a declaration anyway. In a fit of pique, the US will now apparently ban South Africa’s president from attending next year’s G20 summit in Miami.
(By the way, at the time of this writing the placeholder website for the Miami summit features a photo of Trump and the caption “THE BEST IS YET TO COME”. Make of that what you will.)
Sixth, just in the past week, the US has taken on the WTO. In a hard-hitting letter, the Trump administration has declared that it no longer supports the principle of non-discrimination by which all WTO members grant one another “most favoured nation” status. That is to say, the tariff concessions they offer to one fellow member they have to offer to all, unless they sign a formal bilateral trade agreement that covers “substantially all trade”.
Now it is no surprise that the US rejects MFN; it has ignored the principle in all the bilateral trade “deals” it has pushed on its allies this year. But it is something else to officially discard the cornerstone of the order the organisation is founded to uphold. If MFN goes, what, really, is left of the WTO?
There may be more cases to examine. But that’s already a lot to go on. I would tentatively interpret them as teaching three lessons, giving a bit of a mixed verdict. One: the US has moved “from withdrawal to confrontation” on the postwar system of global governance, as an updated book on the economics of the second Trump administration puts it. Two, however: the US has limited bandwidth and has to choose its battles. Three: many opportunities remain for other countries to bypass the US in global governance — if they are willing to bear the sometimes increased cost of doing so.
Everything, then, depends on how united other countries manage to be in maintaining multilateralism between themselves — strength in numbers, after all — and how aggressively the US decides it wants to try to tear multilateralism down. I expect the level of confrontation to rise. Do you? If you find time in between your holiday activities, do share your examples of how global governance is changing and where you think the chips will fall. As always, we’re on freelunch@ft.com.
Other readables
● Ahead of this week’s momentous European Council meeting, I argued in my column that the EU was finally learning to flex its muscles.
● Every four years, many Americans vow to leave the country if their least favourite presidential candidate wins. Most never do. This time is different, according to this New Yorker long read on the Americans whose sense of moral injury drives them to become immigrants elsewhere.
● It has been long enough now for the definitive verdict on the economic cost of Brexit to come in. And it’s not pretty.
● And for those with lots of time over Christmas, here is FT Alphaville’s compilation of FT journalists’ favourite non-FT articles of the year.
