The global trading system as we have known it is dead. The World Trade Organization has effectively ceased to function, as it fails to negotiate, monitor, or enforce member commitments. Fundamental principles such as “most favored nation” status, or MFN, which requires WTO members to treat one another equally except when they have negotiated free-trade agreements, are being jettisoned as Washington threatens or imposes tariffs ranging from ten to more than 50 percent on dozens of countries. Both the “America first” trade strategy and China’s analogous “dual circulation” and Made in China 2025 strategies reflect a flagrant disregard for any semblance of a rules-based system and a clear preference for a power-based system to take its place. Even if pieces of the old order manage to survive, the damage is done: there is no going back.

Many will celebrate the end of an era. Indeed, although U.S. President Donald Trump’s aggressive use of tariffs and disregard for past agreements have put the final nails in the coffin, the turn against global trade has been embraced by both Democrats and Republicans in Washington over the past several years. But before critics revel in the death of the rules-based trading system, they should consider the costs and tradeoffs that come with its dismantlement—and think carefully about the elements that should be rebuilt, even if in altered forms, to avert considerably worse outcomes for the United States and the global economy.

If Washington continues on its current course—defined by unilateralism, transactionalism, and mercantilism—the consequences will be grim, especially as Beijing continues on its own damaging course of subsidized excess capacity, predatory export policies, and economic coercion. The risk of the United States and China playing by their own rules, with power the only real constraint, is contagion: if the two largest economies in the world operate outside the rules-based system, other countries will increasingly do the same, leading to rising uncertainty, drags on productivity, and lower overall growth.

Yet clinging to the old system and pining for its restoration would be deluded and futile. Nostalgia is not a strategy; nor is hope. Looking beyond the existing structures does not mean simply accepting a Hobbesian state of nature. The challenge is to create a system of rules outside the rules-based system of old.

That will require starting over. The best option for moving forward is to craft a system made up of coalitions of the like-minded, which together would constitute a network of open plurilateral relationships—smaller and more flexible than the multilateral trading system. Some coalitions would be mechanisms for trade integration and liberalization. Others might serve to secure supply chains or even to restrict trade in the service of national security. Some countries would be members of multiple coalitions with varied purposes, and coalitions would likely have overlapping memberships and variable geometry. From a purely economic point of view, this system would be suboptimal and less efficient than the global trading system was. But it might well be the most politically sustainable outcome that could—crucially—prevent unilateralism from spinning out of control. It would, in short, allow for a global economy shaped by rules even without a global rules-based system.

The global trading system developed as one part of the multilateral economic structure that the United States led in building, starting during World War II and continuing into the early years of this century. Along with institutions such as the International Monetary Fund and the World Bank, Washington established first the General Agreement on Tariffs and Trade—the GATT, which laid out a set of rules, such as MFN, and created a process by which countries negotiated market-opening commitments—and then, in 1995, the WTO. The 1994 Uruguay Round agreement, which established the WTO, introduced a range of new trade disciplines and a binding dispute-settlement procedure, marking a major step forward in strengthening the multilateral rules-based system. At its founding, the WTO had 76 member countries; today, it has more than 160, which account for 98 percent of global trade.

In the wake of the Cold War, U.S. policymakers hoped that the rules-based trading system that had taken shape in much of the noncommunist world in the preceding decades would expand to encompass former U.S. adversaries, such as Russia, and emerging markets, such as China. The rules would enhance stability, promote openness and integration, and facilitate the peaceful resolution of economic disputes, to the United States’ economic and strategic benefit. Yet even before this system was fully in place, opposition to it emerged, beginning in the early 1990s with the fierce debate over the North American Free Trade Agreement (NAFTA). The first WTO ministerial meeting held in the United States, in Seattle in 1999, was met with massive, headline-grabbing protests.

Trade policy has gotten both more credit and more blame than it deserves in the economic debates of recent decades. Critics of the system tend to conflate the effects of globalization with those of trade policy. Globalization itself had less to do with trade agreements than with technology—particularly the invention of the shipping container and the spread of broadband. From the 1960s on, containerization drastically reduced the cost of shipping goods by sea and land, and there were improvements in the efficiency of air freight, as well. A 2023 National Bureau of Economic Research working paper by Sharat Ganapati and Woan Foong Wong found that from 1970 to 2014, the cost of transporting goods by weight fell between 33 and 39 percent and the cost of transporting goods by value fell between 48 and 62 percent. All of this made the development of global supply chains for goods increasingly attractive. The same was true for trade in services with the spread of computers and Internet access. Seamless connectivity meant that everything from customer and back-office processing to coding and data analytics could be done almost anywhere on earth.

The decline in U.S. manufacturing employment—one of the primary harms in the United States attributed to trade—also flowed mainly from technological change. Researchers at Ball State University have calculated that “almost 88 percent of job losses in manufacturing [between 2000 and 2010] can be attributable to productivity growth, and the long-term changes to manufacturing employment are mostly linked to the productivity of American factories.” Trade, they found, accounted for just 13.4 percent of job loss.

Indeed, that decline in manufacturing employment, which occurred across advanced industrialized countries, started well before Washington signed any major trade agreements. The percentage of U.S. employment in manufacturing shrank by around two to five points per decade from the 1970s through the first decade of this century, according to the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of St. Louis. Germany, broadly considered a manufacturing powerhouse, experienced a similar decline. China’s emergence as the manufacturing floor for the global economy accelerated this trend, but it did not cause it entirely on its own. In developed economies with robust manufacturing sectors, the secular decline of manufacturing employment long predates the era of peak globalization.

Still, a key driver of today’s wariness of trade is that the rules of the rules-based system did not sufficiently anticipate the challenge of China. The emergence of China as an export-driven economic powerhouse resulted in what has become known as the “China shock”—the rapid closure of factories in particular communities in the United States.

It is true that the multilateral trading system suffered from design flaws that proved to be particularly salient with the rise of China—and consequently planted the seeds of the system’s demise. These included the weakness of certain restrictions on state subsidization and the nonmarket behavior of state-owned enterprises, as well as the protection of intellectual property rights; the difficulty of graduating members from developing-country status, which allowed them more lenient treatment; and a consensus, one-country-veto decision-making process that made reform all........

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