stop certain policies, such as taxing US tech firms in Europe. The trade war waged by the US goes well beyond the other G7 members, targeting countries in South(east) Asia, Africa and Latin America. Within this pattern US measures have been the most impactful through trade (exports), foreign direct invest- ment (reduced incentives to invest into Southeast Asia’s export-oriented economies) and finance (‘investment packages’ and ‘purchase’ – from the US – commitments). This discriminatory policy has led China to respond by targeting the US, and also the European Union and Japan. China is a relatively new entrant in the global trade arena but has learned much from the US about eco- nomic coercion and is now upping its game. China now presents itself as a multilateral champion and source of stability, whereas the US government flouts World Trade Organization rules.
east Asian Nations are exploring closer partnerships with CPTPP members. This need has become more urgent since the US and Israel attacked Iran in February 2026, immediately involv- ing the whole Gulf region. The conflict has added new dimensions concern- ing energy and derivative commodities (fertiliser, helium, aluminium, naph- tha and now semiconductors). Asian economies, with their pronounced dependencies on Gulf-sourced energy imports, are particularly exposed. In the short run, the world economy is trapped in this conflict. In the long run, more trade agreements between these middle powers and among devel- oping countries in Asia and Africa are necessary.
// PETER DRAPER Peter Draper is executive director of the Institute for International Trade and director of the Jean Monnet Centre on Trade and Environment at the University of Adelaide. He is also a board member of the Australian Ser- vices Roundtable, a director of the Board of Trustees of the International Chamber of Commerce’s Research Foundation, a non-resident senior fellow of the Brussels-based Euro- pean Centre for International Political Economy, and associated researcher at the German Institute of Develop- ment and Sustainability.
COALITIONS OF THE WILLING: REBUILDING TRADE THROUGH PARTNERSHIPS
Saying this is one thing, but the issue remains implementation. The plain fact is that the US and Chinese econo- mies, both as export markets but also as import and capital sources, are cru- cial to the development trajectories of many developing countries and so very difficult to replace. That is the back- ground against which the discussion might unfold in Évian. One G7 member is clearly identi- fied as the source of the problem. It is beyond doubt that US trade policy is decreasing welfare for both the US and other countries, a fact that obviously does not impress the US president who follows what Richard Baldwin calls the ‘grievance doctrine’. The other six members and the EU need to walk a thin line. They must keep their diplomatic ties to the US president and, at the same time, show leadership in their respective regions, using the lens of mobilising (like- minded) middle powers to buttress the rules-based trading system. There is much to be gained for the G6 by collaborating among themselves, notably through the EU-CPTPP dialogue process, and bringing ASEAN economies into the mix. Through this process, and others, they could work up ways to collectively respond to US depre- dations, and nudge China towards implementing meaningful reforms to its statist economy with which the US, at least would likely agree.
THE STRATEGIC DILEMMA FOR MIDDLE POWERS
Regardless of whether the affected countries, often so-called middle powers, are industrialised, emerging or developing, they are caught between the majors: the US and China. This bilateral interaction will increasingly force countries to pick a side. Canadian prime minister Mark Carney has called for such middle powers to work together towards a rules-based order they could sustain. It is also necessary for these coun- tries to diversify both sourcing and export markets across various regions and thereby try to keep markets open and undistorted as much as possible. Middle powers, including EU mem- bers, are reacting to ‘weaponised trade’ by forming coalitions of the willing in free trade agreements or other forms of cooperation. Since April 2025 the EU has con- cluded three free trade agreements (with Mercosur, India and Australia). African countries are doubling down on their African continental FTA. Asian countries are intensifying their various integration efforts, notably through reviews of the Regional Com- prehensive Economic Partnership and of the Comprehensive and Progressive Trans-Pacific Partnerships. The EU and members of the Association of South-
// ANDREAS FREYTAG Andreas Freytag is a professor of economics at the Friedrich Schiller University Jena, honorary professor at the University of Stellenbosch and visiting professor at the Institute of International Trade at the University of Adelaide. He is a director of Tutwa Europe. He is also founding member of the G20 Trade and Investment Research Network. In 2023, Freytag was a DAAD Fellow at the American German Institute at Johns Hopkins University in Washington DC. He has a weekly column on wiwo-online , a German magazine.
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