A Partial Look Ahead

It is customary at the end of a year to do retrospectives—what happened in the past year and why—and prospectives—what everyone should watch for in the new year. Doing a retrospective on 2025 would take more space, time, and energy than I have, so let’s just say it was a very busy year on trade and move on to what comes next in 2026. A full obituary on 2025 may come later.

Last year demonstrated the perils of prediction, since in January few people expected the extent of Trump’s tariffs and other trade policy changes, and even fewer got their actual impact right—neither a new golden age nor the next great depression, at least so far. For 2026, I will only look at the first half of the year in the hope that near-term events can be more accurately assessed than speculation about what might happen next fall.

While Trump’s ability to drive the global trade agenda is unmatched, and his frequent pivots are unexpected and unsettling, there are three events already scheduled that will anchor the next six months.

The first is the World Trade Organization’s (WTO) 14th ministerial conference in Cameroon at the end of March. The organization’s many difficulties in concluding negotiations and settling disputes have been well documented. There is widespread agreement among the 166 members that reform is needed, but, as usual, there is sharp disagreement over what reforms should be made. There is also continuing disagreement over other elements of the agenda, including finishing the fish agreement, restarting agriculture negotiations, repairing the dispute settlement system, and deciding how to determine which countries are entitled to special and differential treatment because they are developing economies. At this point, there is little optimism that any of these will be resolved, and the best expectation is for statements of commitment to resolve them in the future, which will be worth roughly the paper they are printed on.

The good news is that the United States, now that it has a confirmed ambassador in Geneva (Joseph Barloon), is taking an active role in the debate via a detailed statement submitted in mid-December. The bad news is that the statement is not likely to advance the ball. It is basically an attempt to justify Trump’s tariff policies by arguing that the most-favored-nation (MFN) concept is, or should be, dead, which would permit countries to treat others differently rather than having to provide equal treatment for all members. Nevertheless, the fact that the United States made a statement is encouraging evidence that the administration does not intend, at this point, to abandon the organization. Staying in is a low bar, but it is better than pulling out. Even so, we should not expect much progress at the ministerial, less because of the United States than because of India, which has reigned for years as objector-in-chief and shows no sign of changing its approach. That will be a challenge for the Trump administration, which wants the WTO to make its moratorium on e-commerce duties permanent. That will require negotiating with India, which may not be inclined to do the administration any favors in light of the 50 percent tariffs Trump imposed.

The second event is the next Trump-Xi Jinping meeting, tentatively set for April. Here too, expectations are low. The two countries seem to be falling into a cycle of retaliation and counter-retaliation that provokes meetings at increasingly high levels, ending with one where the two leaders negotiate a ceasefire and pull back the actions they have taken, setting the stage for another round as one of the countries inevitably does something that irritates the other, starting the cycle over again.

Here too, pessimism is the best approach. Both sides believe they have more leverage than the other, and both have demonstrated a willingness to use it. Neither seems willing to resist the temptation to respond every time the other does something it doesn’t like. That means the two countries are no closer to solving their big problems. For the United States and many other countries, a key issue is China’s determination to grow its manufacturing sector, creating overcapacity in multiple sectors at the expense of others’ manufacturing. Global resentment over this is growing, most recently in Mexico, but there is no coordinated effort to address it. Instead, since China and the United States cannot agree on the big issues, we spend our time fighting over the small ones.

The third event is the decision on the renewal of the U.S.-Mexico-Canada Agreement (USMCA) on July 1. While the odds favor extending the agreement, albeit with major revisions, there are other options available, ranging from renewal without change to refusal to renew—which would lead to up to 10 more years of annual negotiation—to outright withdrawal by one or more of the parties, or the substitution of bilateral agreements among the parties instead of a single trilateral agreement. Of the three events, this may be the most consequential for the U.S. economy, given the closely integrated nature of the three economies. The demise of the agreement would produce major disruptions in all three countries, although most of the options, aside from immediate withdrawal, would at worst lead to 10 more years of negotiations. Even so, the uncertainty that would create would be a major drag on investment and trade.

Uncertainty has been the hallmark of the past year. Tariffs have been on, off, up, down, with exemptions, without exemptions, and China is probably the best example. The result is delay—if businesses can’t see what will happen next, they hold on to their money. The irony is that very delay hampers Trump’s goal of rebuilding the U.S. industrial base. We will see if 2026 brings a change in Trump’s yo-yo policies, but the smart money is on nothing changing.

William A. Reinsch is senior adviser and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.