The Trump tariffs are heralding a new form of global engagement: multilateral bilateralism

A container ship exits the Bosphorus Strait to the Marmara Sea in Istanbul earlier this month. Getty

For decades, multilateralism served as the backbone of global governance. Institutions such as the UN, EU and the World Trade Organisation rested on the belief that global challenges demanded collective rules, open trade and shared responsibility. But at the outset of Donald Trump’s second tenure as US President, a new grammar of global power is emerging: multilateral bilateralism.

It is not a rejection of global engagement, but rather a reconfiguration.

Under this new arrangement, states move away from comprehensive multilateral agreements and instead construct a patchwork of bilateral deals. Each is tailored to a specific issue or partner – deals on hydrogen here, digital trade there, tariff-free corridors in one region, supply chain pacts in another. The UAE’s Comprehensive Economic Partnership Agreements, Britain’s post-Brexit deals and India’s selective industrial agreements reflect this new ethos.

In many ways, Switzerland offered an early model. For years, it maintained more than 100 bilateral treaties with the EU while avoiding full integration. Yet its success hinged on one critical feature: the multilateral discipline of its trading partners. Switzerland never had to negotiate with each EU member individually, nor with every US state or Canadian province. Multilateralism elsewhere allowed Switzerland to cherry-pick bilateralism at home.

This distinction matters because the wider adoption of multilateral bilateralism – particularly by large players such as the US – may lead to a very different outcome. The Trump administration’s tariff blitz, including his “Liberation Day” policy, provided what some economists describe as a natural experiment to observe this shift in real time.

Under this new arrangement, states move away from comprehensive multilateral agreements and instead construct a patchwork of bilateral deals

As Science magazine reported, researchers from the University of Cambridge and the Toulouse School of Economics modelled how global trade would re-organise under a regime of unilateral tariffs and bilateral negotiations. Their simulations showed global supply chains becoming less centred around the US and more fragmented, with countries such as France and Mexico gaining new export opportunities while costs and complexity rose around the board.

This fragmentation is one of the core weaknesses of the multilateral bilateralism model. Unlike a single multilateral framework that streamlines regulatory compliance and dispute resolution, a proliferation of bilateral deals multiplies uncertainty. Cambridge’s Supply Chain AI Lab found that businesses, in response to Trump-era tariffs, diversified their suppliers – raising costs and reducing efficiency. Meanwhile, the ever-shifting nature of US trade policy – tariffs announced, revised, or revoked within days – exposed the fragility of bilateral arrangements when not embedded in stable institutions.

Nuno Limao, a trade economist at Georgetown University, highlights how past booms in trade – such as China’s post-WTO accession – were fuelled less by tariff reductions and more by the predictability they introduced. Mr Trump’s model, by contrast, propelled uncertainty. As Mr Limao and others note, it undermines the very basis of confidence that trade partners, investors and firms need to engage across borders.

This is where the potential danger lies. Bilateralism may offer tactical flexibility, but it introduces strategic vulnerability. Smaller economies lack leverage, negative effects on third-party partners are ignored and the global marketplace becomes a regulatory minefield. Dispute settlement, instead of relying on neutral arbiters, is increasingly subject to geopolitical muscle.

The cost of this complexity may become clear only over time. But the early signs – mounting business costs, trade route rewiring, geopolitical friction – suggest that what seems like sovereign agility may, in fact, be institutional entropy.

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This shift also presents a dilemma for major private-sector players, especially multinationals that rely on globally integrated operations. These companies, once champions of the seamless efficiency offered by multilateral regimes, now find themselves navigating an increasingly fragmented world of trade rules, standards and political expectations. Some, for instance, have had to restructure their supply chains away from China and towards countries like Vietnam and India – not just in response to cost considerations, but due to bilateral political pressures and evolving export restrictions. Others face increasing scrutiny and differentiated regulatory regimes across markets, challenging their digital infrastructure and cross-border logistics. The burden of having to comply with divergent tax rules, content regulations and labour standards in addition to a mosaic of bilateral trade agreements make global operations complex and inefficient.

This environment imposes not only higher operational costs, but also strategic uncertainty. Product standards, data protection laws, ESG regulations and even AI ethics protocols are no longer harmonised. Instead, firms face a patchwork of obligations that are often politically charged and prone to change. As a result, companies must optimise not only for efficiency, but for resilience too. But there is a limit to agility. No amount of corporate agility can substitute for the stabilising power of global institutions. The question is not whether businesses can adapt – but how long they can afford to, before the costs outweigh the benefits.

Multilateral bilateralism, then, may be a transition phase – an attempt to extract sovereignty from globalisation without fully decoupling, or perhaps it may prove to be a temporary phase before the return to the good old world of multilateralism. But unless it evolves into a new form of structured pluralism – where flexibility exists within a rules-based framework – it will eventually be seen by many not as an evolution, but regression. Until then, the world remains caught in the experiment.