Changes likely in multilateral trade order

As tariff policies of the United States challenge the global trade order, the world might build a new multilateral trade system and see reshuffling of the international monetary architecture, in which Europe and emerging markets such as China could play a bigger role, leading international economists said.

Nobel Prize-winning economist Michael Spence said the US has shown an anti-multilateral posture under the current administration, marked by its withdrawal from the World Health Organization.

With that, structural changes may unfold in the international trade system, he said. While there could be different scenarios ahead, the most likely one is that Europe as well as China and other major emerging economies will sponsor a process that results in a reasonably functional, practical and workable multilateral system.

That could happen even in the absence of US support, though the process could be messy, Spence said. Such a scenario would not have worked 25 or 30 years ago, but is likely now as emerging economies have expanded their share in the global economy.

"I think we're going to still have a multilateral system because the major players, other than the US, are big, powerful and committed to having a workable multilateral structure," he said, adding that it would be possible for the US to rejoin the system.

While the post-pandemic era has brought rapid changes, Spence said he doesn't think this will derail the process of trying to make a practical, somewhat more complex version of multilateralism work, because that would benefit all parties and be essential in addressing global challenges such as climate change.

Spence made the remarks in a video address to the 2025 Tsinghua PBCSF Global Finance Forum, which was held over the weekend in Shen­zhen, Guangdong province. The forum, organized by Tsinghua University's PBC School of Finance, was themed "A Shared Future: Building an Open and Inclusive Economic and Financial System".

Speaking at the forum, Marek Belka, former prime minister of Poland, pointed out that US tariff policies bring instability to the global economy and may present a paradox regarding the US dollar.

Belka said the US, on the one hand, may favor weakening the dollar to rebuild its industrial competitiveness, but, on the other hand, it also has an interest in maintaining the greenback's position as a leading global reserve currency.

Due to the instability caused by US trade policies — which Belka referred to as a "dangerous play with tariffs" — capital has started to flow out of dollar-denominated markets, a trend that can gradually erode the dollar's role as a global reserve currency, he said.

"In the fixed income space, we are just at the beginning of an adjustment in the portfolio of central banks and institutional investors, which I think will lead to a gradual decrease of the share of the US dollar in (global reserves)," said Massimiliano Castelli, UBS Asset Management's head of global sovereign markets strategy and advice.

While the lack of alternatives would mean there would not be an imminent demise of the US dollar as the dominant reserve currency, Castelli pointed to the potential for the euro and the renminbi to receive more funding if there is diversification away from the dollar.

"I think the potential is there (for the renminbi)," he said, adding that key limitations of the yuan's international role include the fact that it is yet to be fully convertible, as well as China's low interest rate environment.

Hu Xiaolian, former chairwoman of the Export-Import Bank of China, said the global monetary system is evolving toward greater diversity and inclusiveness, with more currencies expected to play a role in the international monetary landscape.

She pointed out that local currency settlement among emerging market economies is becoming increasingly common, and alternative currencies are now being used in commodity pricing and transactions, as well as for safeguarding regional financial stability.