atlanticcouncil.org

How Trump could upend global finance—and how the world might respond

US President Donald Trump’s second term may soon deliver a seismic disruption of the global financial system. In February, the White House called for a six-month State Department review of “all intergovernmental organizations” in which the United States is a member, with an eye toward withdrawing from any that are “contrary to the interests of the United States.”

That review could put the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) in the crosshairs, raising doubts about the United States’ commitment to the stability and predictability these institutions were designed to uphold. The Trump administration reportedly paused contributions to the WTO this month, after targeting the organization in his first term. And though Trump engaged with the World Bank and IMF in his first term, he has not revealed his plans for these institutions in his second term. The Heritage Foundation’s Project 2025, from which Trump at times has distanced himself but which has formed a blueprint for much of the administration’s early agenda, calls for withdrawing from both.

Concerns are growing—particularly among policymakers and experts in “New South” countries in the Mediterranean and South Atlantic basins—about the direction in which the international financial system is heading. The coming months and years will reveal the consequences of these evolving dynamics for global economic governance.

Multilateral institutions under siege

The IMF, World Bank, and WTO have provided the backbone of post-World War II global financial stability. But if Trump’s review of multilateral organizations leads to the United States reducing its contributions or withdrawing its leadership entirely, that could render these institutions ineffective, leaving emerging markets vulnerable to soaring borrowing costs and financial instability.

The IMF’s effectiveness hinges on US backing. A disengaged Washington would severely weaken the institution’s ability to manage global financial shocks—or to see them coming in the first place. Without access to US fiscal data and financial support, the IMF’s early-warning system would be significantly impaired, leaving emerging economies particularly exposed to unforeseen economic crises. A diminished World Bank, meanwhile, could create space for alternative lenders, such as China’s Asian Infrastructure Investment Bank.

In the event of a US withdrawal from the Bretton Woods institutions, other major players such as China, India, and European countries may push for reforms, but any new framework would likely be marked by deep internal divisions and a departure from consensus-driven governance.

From rules-based to power-based trade

Even before the apparent pause in US funding, the WTO has suffered under US pressure, with its dispute-settlement mechanism effectively sidelined by Washington’s refusal to appoint appellate judges. The result? Global trade is increasingly governed by bilateral deals, where economic power, rather than rules, dictates outcomes.

At best, this shift accelerates the rise of plurilateral trade arrangements, where smaller groups of nations set the terms of trade outside the WTO framework. At worst, it heralds a chaotic trade environment where power politics replace consensus-driven rulemaking, fragmenting the global trading system into competing blocs.

If nations are forced to align with either a US-centric order or alternative economic blocs, that would heighten the risk of fragmentation and global instability.

A shattered order—or the dawn of a new system?

As the United States considers pulling back from the global financial system, countries in Latin America, Africa, and Asia are seeking greater financial independence and constructing alternative frameworks for trade, investment, and crisis management. These trends were evident before Trump’s return to the White House, and his approach is likely to only accelerate them. Among the key developments:

De-dollarization initiatives: Nations from the BRICS grouping of emerging economies, including Brazil and India, are working to expand trade in local currencies, while China and Russia increasingly settle deals in yuan and rubles.

New development banks: Institutions such as the African Export-Import Bank (Afreximbank) and the New Development Bank (commonly known as the BRICS bank) are emerging as real—albeit far from optimal—alternatives to the IMF and World Bank. They offer financing without the traditional Western-style conditionalities, reflecting a growing desire among some countries for options that align more closely with their own political and economic priorities.

Alternative payment systems: Russia’s System for Transfer of Financial Messages (SPFS) and China’s Cross-Border Interbank Payments System (CIPS) platforms are attempting to serve as substitutes for the globally dominant, Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging service, though both SPFS and CIPS are still a long way from becoming true alternatives to SWIFT. Meanwhile Iran and India are exploring digital-payment linkages to bypass Western financial restrictions.

Regional trade agreements: The African Continental Free Trade Area and Latin America’s growing Mercosur bloc are shifting economic dependencies away from Western-led structures.

These developments signal a significant and, in many ways, regrettable development: The world is moving beyond the dominance of Western financial institutions toward a more fragmented and less coordinated economic order. While this new landscape may be more regionally responsive, it also risks undermining the coherence, predictability, and standards that global institutions—however imperfect—once aimed to provide.

The road ahead

The coming months—particularly April’s IMF and World Bank Spring Meetings in Washington, DC—will provide crucial insights into the trajectory of global economic governance. The Trump administration’s review of US membership in international organizations also will be a defining moment: Will US actions and global reactions bring about a complete retreat from multilateralism, or will international financial institutions adapt to new geopolitical realities?

One thing is clear: The global financial order is at a tipping point, and the choices made today will shape the economic landscape for decades to come.

Ferid Belhaj is a senior fellow at the Policy Center for the New South. He served as World Bank vice president for Middle East and North Africa from 2018 to 2024.

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.