Middle Powers and a Rupturing Global Order

Jingyuan Cui, Nicolas Fernandez-Arias, Pierre-Olivier Gourinchas, Gee Hee Hong, Nan Li, Andrea Presbitero, Petia Topalova, Shihangyin Zhang and Robert Zymek

No 22132, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Can middle powers—economies that are not large enough to be great powers themselves, but capable of influencing global outcomes through cooperation and coalition building—sustain trade cooperation if trade fragmentation were to intensify? We find that following the April 2025 US tariff announcement many middle powers strengthened trade ties and expanded preferential trade agreements among themselves while reducing their exposure to the US. Using a quantitative trade model, we show that a coalition of middle powers can raise its welfare in a hypothetical environment in which economies set tariffs unilaterally to maximize their own welfare. We consider two coalition strategies: tariff coordination and deeper internal integration. While the former is easier to sustain, deeper integration delivers larger benefits and is positive-sum. Both types of coalition become self-enforcing once they reach sufficient economic mass, suggesting that a credible coalition of middle powers could chart a path back from a hypothetical ruptured global order towards global trade cooperation.

Keywords: Middle powers; Optimal tariffs; Trade agreements; geoeconomic fragmentation (search for similar items in EconPapers)
JEL-codes: F13 F15 F42 (search for similar items in EconPapers)
Date: 2026-11
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