The Crisis of Economic Multilateralism: Before and After Donald Trump

In the face of the crisis of multilateralism – exacerbated by the Trump administration’s overt unilateralism – the question arises as to the future of global economic governance. This crisis was already evident in the 2000s, as major emerging economies began to challenge forums and institutions where they felt (and rightly so) underrepresented. Furthermore, the proliferation and overlap of bodies that are more competitive than complementary raise questions about the effectiveness of development aid, undermine the transparency of global governance, and cast doubt on its ability to manage global interdependencies and global public goods. Against a backdrop of geopolitical tensions and geoeconomic fragmentation, is a return to a system of multilateral cooperation with a universal scope still conceivable? We discuss this with Pierre Jaillet, a research associate at IRIS and an adviser at the Jacques Delors Institute.

Predatory Unilateralism

Global economic and financial cooperation is based on rules, institutions and multilateral dialogue. Yet rules – particularly in the area of international trade – are being flouted, the legitimacy of institutions is being challenged, and we are experiencing an unprecedented crisis of multilateralism. Donald Trump’s first term in office had already been marked by a series of blows to multilateralism, the most emblematic of which was the United States’ withdrawal from the Paris Climate Agreement in 2017. His second term exemplifies a predatory approach in which power dynamics and a ‘transactional’ logic have replaced discussion among peers and arbitration by international institutions. This is evidenced in particular by the abrupt closure of the United States Agency for International Development (USAID), withdrawal from UN bodies and a distancing from the G7 and G20. Donald Trump has also never hidden his contempt for the Bretton Woods institutions (BWI), which he has repeatedly attempted to exploit (for example, by calling on the World Bank as early as 2019 to stop lending to China or by urging the International Monetary Fund (IMF) to stop interfering in the climate transition).

A crisis that became apparent as early as the 2000s

The crisis in multilateral economic governance, however, predates Donald Trump’s election by a long time, and his departure alone will not be enough to resolve it. His presidency served as the trigger for the collapse of a world order that was precariously balanced. It exposed the vulnerabilities of a system based on institutions inherited largely from the immediate post-war period or the ‘Trente Glorieuses’, which had failed to account for the shift in the global economy’s centre of gravity towards the countries of the ‘Global South’. The great financial crisis of 2008–2009, the growing awareness of the climate emergency and the pandemic have certainly demonstrated the capacity of multilateral economic cooperation to contribute to crisis management and to promote new forms of global public goods, such as the Conferences of the Parties (COP). However, these advances have been too limited to ensure its resilience in the face of geopolitical tensions fuelled by the wars in Ukraine and Iran, against the backdrop of the hegemonic rivalry between the United States and China.

IBWs in the Hot Seat

Major emerging economies are questioning the representativeness and governance – and thus the legitimacy – of these institutions created at the 1944 Bretton Woods Conference. China’s quota in the IMF – despite being the world’s largest or second-largest economy (in current dollars or purchasing power parity (PPP)) – is thus limited to 6.4 per cent, or about a third of that of the United States (17.4 per cent) and a quarter of that of the European Union (23.1 per cent), while the broader BRICS+ group (40 per cent of global GDP in PPP) holds only 18.5 per cent. This stagnation in the membership of the BWIs – whose structure has been virtually frozen since 2010 – naturally leads to frustration among emerging economies and encourages them to create their own financial institutions (such as the Asian Infrastructure Investment Bank (AIIB) or the New Development Bank, known as the ‘BRICS Bank’). However, global economic governance is already criticised for its complexity and lack of transparency – a phenomenon amplified in recent decades by the proliferation and intertwining of multiple bodies and institutions, operating according to a logic of competition rather than complementarity, which limits their ability to establish consensus-based objectives and, even more so, to translate them into operational goals.

What about international forums?

The G7 still accounts for nearly 44 per cent of global GDP (in current dollars) but less than 10 per cent of the world’s population. Its composition reflects the group photo from the first summit in 1975 in Rambouillet, which does not prevent it from occasionally setting itself up as the world’s governing body and addressing UN-related issues, even if it means neglecting the areas where it holds a comparative advantage (it accounts for more than 50 per cent of international capital flows and 90 per cent of foreign exchange transactions). Yet the G7 no longer discusses – or discusses very little – issues related to the coordination of economic and monetary policies. But can it do so when the leader of the world’s leading economic power regularly makes hostile statements against his partners or threatens protectionist sanctions?

The creation of the G20 in the late 1990s was intended to better involve emerging economies in international economic cooperation. Meeting at the level of heads of state and government since 2008, it accounts for nearly 80 per cent of global GDP and 60 per cent of the world’s population, thereby avoiding criticism of a lack of legitimacy – even though Europe is over-represented and Africa is under-represented within the group.

During the great financial crisis of 2008–2009, the G20 played a leading role, setting out roadmaps for international financial institutions and regulatory bodies. Its ambition to serve as the linchpin of economic cooperation soon ran into political roadblocks amid growing geoeconomic tensions. While it can still point to some useful initiatives, the G20 has lost much of its initial momentum and has fallen back into the routine of agendas that often reflect the concerns of rotating presidencies – presidencies that are frequently exploited for the purposes of domestic political messaging.

The BRICS Forum: Anti-G7 and Anti-G20?

The expansion of the BRICS group (Brazil, Russia, India, China and South Africa), announced in August 2023, to include several new members from the Middle East and Africa demonstrated a desire to challenge a global governance system perceived as being dominated by developed countries. The expanded group accounts for nearly 40 per cent of global GDP (in PPP), 45 per cent of the world’s population and 25 per cent of exports (more than 50 per cent for many ‘critical’ materials) and has been presented as the counterpart to the G7 for major emerging economies (or the ‘Global South’). Some observers have also argued that it weakens a G20 already undermined by geoeconomic divisions and the uncooperative attitude of its key members. It should be noted, however, that the founding members of BRICS are also part of the G20, which they are careful to accommodate – to the point of endorsing its leadership in economic and financial matters, as evidenced by their August 2023 statement: ‘[…] We reaffirm the importance of the G20 in playing the role of the premier multilateral forum in the field of economic and financial cooperation […]’. In reality, it is primarily the BWIs that are in the crosshairs.

Nevertheless, the BRICS group – especially in its expanded form – remains an extremely heterogeneous economic and financial bloc with a politically diverse membership, where authoritarian regimes and democracies coexist and where China’s hegemonic ambitions are challenged. Its ability to influence the reshaping of global economic governance remains uncertain at this stage, but its rise cannot be ignored by Western powers as they look towards a restructured global economic governance framework.

Is International Monetary Cooperation the Blind Spot of Multilateralism?

Since the collapse of the Bretton Woods system in 1971 – which marked the end of the dollar’s role as the anchor currency of the international monetary system (IMS) – even though the dollar has retained a dominant, if not hegemonic, role in global reserves and financial transactions, the major economies have been operating within a ‘non-system’ of floating exchange rates. Issues related to the IMS, as we have seen, have virtually disappeared from the G7’s agendas, and the Trump administration now refuses to assume any responsibility for managing what remains, willy-nilly, a global public good. It uses the dollar as a lever of diplomatic influence and promotes the rise of cryptoassets (stablecoins) backed by dollar-denominated assets to facilitate the financing of the United States’ twin deficits (fiscal and current account), at the risk of ultimately threatening the monetary sovereignty of its partners. This uncooperative stance is prompting China and other emerging economies to break free from the dollar’s dominance and encouraging Europeans to adopt a less cautious approach regarding the euro’s international role. We know that network effects create significant inertia in this area, but the question of the appropriate forum for consultation is already arising in light of a potentially unstable and fragmented multipolar IMS. We should add that the Trump administration has also partially called into question post-financial-crisis achievements (the Basel III multilateral agreements and the US Dodd-Frank Act), with the risk of a drift towards a ‘race to the bottom’ in regulation in other jurisdictions. This represents a new breach in international cooperation, posing risks of instability in the event of a systemic crisis affecting closely interconnected financial systems.

What are the prospects?

How might international governance evolve in a context of ongoing geopolitical tensions and economic and financial fragmentation? A return to a system of multilateral cooperation with a universal scope seems entirely illusory today. The idea of ‘polylateralism’ has been raised, involving states and various actors (multinational corporations, NGOs, civil society, etc.) within the framework of ‘voluntary cooperation’ that sets credible and targeted objectives to overcome inter-state antagonisms. Nevertheless, the contours and modalities of such a system remain very vague. It remains essential to undertake, without delay, a thorough reform of existing institutions – particularly the BWIs – by adjusting the representation of their members according to their economic (and demographic) weight, so that they may regain the legitimacy and influence they still possessed in the early 2000s. This clearly entails a political cost for the founding countries and, in particular, a need for the Europeans to adapt to the times. But the option of a ‘European seat’ (consistent with the existence of its single market and the Economic and Monetary Union (EMU)) is part of the overall solution, and the European voice would be stronger if united rather than divided in the face of the major powers. Finally, regarding the role of the forums and their interactions – unless we imagine the unlikely scenario of the G7 opening its doors to China and a few other major emerging economies – the G20 currently appears to be the most relevant group and the one best suited to bridge the gap between different countries, in order to manage – in consultation with the United Nations and the reformed international financial institutions, and transcending national interests – global public goods and the climate emergency facing the planet.

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This article is part of a session on the topic of “Gouvernance économique face à la crise du multilatéralisme” organised for Journées de l’économie to be held in Lyon from November 3 to 5, 2026, under the overall theme: “Tous apprentis face au chaos”

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This article has been translated from French into English using artificial intelligence.