ELIAMEP

• Turkey Has Established a Credible Presence in LAC:
  Since 2000, Turkey has expanded trade with Latin America and the Caribbean (LAC) by over 450%, multiplied its diplomatic missions, and secured targeted investments in ports, energy, tourism, and infrastructure.
• Challenges and Competition: Turkey faces competition from China, the EU, and the US in LAC; third-party countries can learn from Turkey’s challenging experience.
• A Selective Middle-Power Strategy Is Driving Results:
  Rather than competing on scale with China, the US, or the EU, Turkey has relied on focused FTAs, business councils, logistics hubs, and niche economic diplomacy to “punch above its weight.”
• Diplomatic Visibility Generates Political Returns:
  Embassy expansion, high-level visits, and engagement with CELAC, MERCOSUR, and CARICOM have translated into multilateral support and increased political recognition across the region.
• Soft Power Compensates for Structural Weaknesses:
  Cultural exports, humanitarian aid via TİKA, scholarships, and media outreach have produced high-impact visibility and goodwill at relatively low cost, despite limited historical or cultural ties.
• Lessons for Third-Party Countries:
  Turkey’s experience shows that sustained engagement, institutional presence, and sectoral specialization can deliver influence in LAC without superpower resources.

Read here in pdf the Policy paper by Ioannis N. Grigoriadis, Senior Research Fellow, Head, ELIAMEP Turkey Programme and Grigoris Patsakis, Project Manager at the ELIAMEP Turkey Programme.

Introduction

Turkey has significantly expanded its economic, political, and cultural engagement with Latin America and the Caribbean.

Turkey has significantly expanded its economic, political, and cultural engagement with Latin America and the Caribbean (LAC), transforming virtually non-existent ties into a dynamic partnership. Since 2000, trade between Turkey and LAC has increased by approximately 450 percent, reaching USD 17.4 billion in 2022. At the same time, Turkish investments in strategic sectors such as energy, tourism, and infrastructure highlight Ankara’s long-term and calculated approach to the region. This expansion is driven by Turkey’s “multi-dimensional” foreign policy, which combines trade agreements, diplomatic outreach, and cultural diplomacy to deepen its presence in LAC.

This policy paper addresses three central research questions: how Turkey’s engagement with LAC has evolved over time; what strategies, challenges, and limitations it faces in the region; and what lessons Turkey’s experience offers to third-party countries seeking to expand their own engagement with LAC. By examining Turkey’s implementation strategies, including free trade agreements (FTAs), infrastructure investments, and cultural diplomacy, the paper assesses both the effectiveness of Ankara’s approach and its broader applicability for other actors pursuing regional expansion.

The paper is structured as follows. First, it provides a historical overview of Turkey–LAC relations. Second, it examines Turkey’s economic, political, and cultural engagement strategies in the region. Third, it highlights key successes as well as persisting challenges. Fourth, it evaluates the overall effectiveness of Turkey’s policies. Finally, the paper offers policy recommendations and identifies transferable lessons for third-party countries seeking to overcome similar challenges in their engagement with LAC. The analysis draws on primary sources, including trade and investment data, as well as secondary sources such as peer-reviewed academic studies, think tank reports, and reputable news articles.

Overall, the paper concludes that Turkey has substantially expanded its diplomatic, economic, and cultural footprint in LAC, carving out niche areas of influence and fostering pragmatic partnerships across the region. Despite constraints related to geographic distance, competition, and the dominance of major global powers, Turkey’s experience demonstrates how a middle-size power can generate tangible economic outcomes and cultivate meaningful relationships, offering valuable lessons and inspiration for other countries seeking to engage with LAC.

A Historical Overview of Turkey–Latin America Relations

Its engagement was renewed in the 1990s, with the 1998 Action Plan and 2006’s “Year of Latin America and the Caribbean”.

Turkey’s first bonds with LAC date back to the early republican years. The League of Nations’ invitation to Turkey to join in 1932 was supported by several LAC states, and Turkey established its first Latin American embassy in Santiago in 1930. During the Cold War, relations stagnated due to Turkey’s NATO alignment. Its engagement was renewed in the 1990s, with the 1998 Action Plan and 2006’s “Year of Latin America and the Caribbean” in particular marking a more structured approach to LAC.

Turkey–Latin America Relations: The Economic, Political and Cultural Landscape

The $14 Billion Question: Turkey’s Economic Diplomacy in Latin America

Since 2000, trade between Turkey and Latin America has grown by 450 percent, surging from $1 billion in 2002 to $14 billion by 2024.

Over the past two decades, Turkey has significantly deepened its economic engagement with LAC, a market of 650 million people, driven by a “multi-dimensional foreign policy” approach. Through economic diplomacy, Turkey has effectively leveraged trade expansion strategies and agreements to strengthen its commercial ties. Since 2000, trade between Turkey and Latin America has grown by 450 percent, surging from $1 billion in 2002 to $14 billion by 2024, with Brazil, Mexico, and Colombia emerging as key partners.

Turkey has also pursued free trade agreements (FTAs) to reduce barriers and expand market access. It secured an FTA with Chile in 2011, while negotiations with Ecuador, Colombia, Mexico, and Peru remain ongoing. Additionally, Joint Economic Commissions and business councils, such as the Turkey-Brazil High-Level Cooperation Commission, facilitate sectoral collaborations in energy, mining, and infrastructure.

Beyond trade, Turkey’s economic engagement has also extended into the realm of investment, with its investments in LAC growing significantly. The 2014 Turkey-Colombia investment agreement, and projects like ANEX Tourism Group’s $1.8 billion hotel investment in Punta Cana, highlight this trend. Whereas, until the mid-2000s, KordSa (a subsidiary of Sabanci Holding) was the only Turkish company investing in the region, today over 20 Turkish companies are active, primarily in the automotive, mining, and transportation sectors. Notable projects include Yıldırım Holding’s $1.6 billion investment in port construction in El Salvador and Karpowership’s floating power plants in Cuba and Brazil.

Supporting this broader engagement, Turkish Airlines has significantly expanded its regional connectivity across LAC. The airline currently operates flights to São Paulo (GRU) and Rio de Janeiro (GIG) in Brazil; Buenos Aires (EZE) in Argentina; Mexico City (MEX) and Cancún (CUN) in Mexico; Bogotá (BOG) in Colombia; Panama City (PTY) in Panama; Caracas (CCS) in Venezuela; and Santiago (SCL) in Chile. The planned addition of Lima as its tenth destination in the region represents a further deepening of this network, strengthening connectivity with the Andean subregion and amplifying opportunities for trade, tourism, and business mobility, while reinforcing Turkey’s economic integration with LAC.

From Ankara to Latin America: Case Studies of Successful Economic Partnerships

Turkey has diversified its trade partnerships, engaging with countries of all sizes from Brazil to Suriname. 

It is also worth noting that Turkey has diversified its trade partnerships, engaging with countries of all sizes from Brazil to Suriname. This flexible approach demonstrates how third-party countries can expand their regional presence by tailoring strategies to different national profiles. To illustrate this, a selection of countries with varying population sizes has been made: Brazil, as a large country; Argentina, as a medium-sized state; Uruguay, as a smaller state; and Suriname, as a very small state.

• Brazil: In 2023, Turkey exported $992 million, including carbonates and motor vehicle parts, while Brazil exported $3.52 billion, led by soybeans and iron ore.
• Turkey’s exports to Brazil have increased at an annualized rate of 9.5%, from $629 million in 2018 to $992 million in 2023.

• Argentina: In 2023, Turkey exported $280 million to Argentina, including refined hydrocarbons and motor vehicles, while Argentina exported $585 million to Turkey, led by soybeans and dried legumes.
• Turkey’s exports to Argentina have increased at an annualized rate of 2.4%, from $249 million in 2018 to $280 million in 2023.
• Uruguay: In 2023, Turkey exported $181 million to Uruguay, with key exports being motor vehicles, parts and accessories, while Uruguay exported $354 million led by sulphate chemical woodpulp and bovine products.
• Turkey’s exports to Uruguay grew rapidly, increasing at an annualized rate of 23.6% from $62.8. million in 2018 to $181 million in 2023. Key Turkish exports included motor vehicle parts ($36.1 million), vehicle bodies ($17.8 million), and petroleum coke ($5.07 million).
• Suriname: Although a considerably smaller economy, trade reached $18.2 million in 2019, reflecting Turkey’s desire to engage with every economy in the region.

Atlantic Ambitions: Turkey’s Political Expansion in Latin America

Between 2015 and 2020, the Turkish President visited Latin America more frequently than all of his predecessors put together.

Meaningful political and economic cooperation has gained momentum during the AKP era. Particularly between 2002 and 2016, Turkey adopted a strategy of deeper regional integration characterized by:

• Trade agreements: Turkey has signed FTAs with inter alia Chile, and is actively working towards FTAs with Colombia, Ecuador, Mexico, and Peru.

• Diplomatic expansion: In Latin America, Turkey initially maintained embassies only in Chile, Brazil, Mexico, Argentina, Cuba, and Venezuela. Beginning in 2010, Ankara expanded its diplomatic presence with embassies in Colombia and Peru, followed by the opening of the Turkish Embassy in Ecuador in 2012. Between 2013 and 2014, new missions were established in the Dominican Republic, Panama, Costa Rica, and Guatemala. A further wave in 2018 included Trinidad and Tobago, Bolivia, Uruguay, and Paraguay, plus the opening of the embassy in El Salvador in 2022. Including the newly established (November 2025) embassy in Managua, Nicaragua, Turkey’s diplomatic footprint now extends to twenty missions. Overall, Turkey’s network of embassies in LAC grew from six in 2009 to twenty little more than a decade later, signalling a strong and sustained commitment to deepening political and diplomatic ties in the region.
• High-level visits: Turkey has also intensified its high-level diplomatic activity. Between 2015 and 2020, the Turkish President visited Latin America more frequently than all of his predecessors put together. This expansion of political dialogue was bolstered by reciprocal visits, beginning with Costa Rican President Óscar Arias’s 2009 trip to Turkey and followed by Turkish Foreign Minister Ahmet Davutoğlu’s 2014 visit to the Dominican Republic, where he signed cooperation agreements and described the country as a “star player” and “regional base” for Turkish businesses. Turkey also extended its diplomatic reach beyond major regional actors by cultivating ties with smaller states such as St. Vincent and the Grenadines, and made symbolic inroads with President Erdoğan’s 2015 visit to Cuba, which reflected its deliberately inclusive regional approach.

Importantly, this diplomatic engagement has often met with a positive response. In 2022, El Salvador’s President Nayib Bukele chose Turkey for his first official overseas visit, declaring that “El Salvador wants to be part of Türkiye’s growth”. This move highlighted the strategic importance he places on the two states’ collaboration. While Bukele’s Palestinian ancestry and his father’s conversion to Islam may be reasons for his sympathetic stance towards Turkey, there are more than personal links. Driven by shared priorities of development, autonomy, and diversified international alignments, the relationship reflects Turkey’s broader shift toward a multipolar diplomatic strategy.

Multilateral engagement: Turkey has expanded its presence in LAC by deepening its involvement in a broad range of regional and multilateral frameworks. This engagement includes obtaining observer status in key political and economic organizations such as the Organization of American States (OAS), the Association of Caribbean States (ACS), the Pacific Alliance, the Central American Integration System (SICA), and the Latin American Parliament (PARLATINO), as well as participating in the Ibero-American Summit. In addition, Turkey is a member of UN-affiliated regional bodies, notably the UN Economic Commission for Latin America and the Caribbean (ECLAC), and has established institutional relations with the Organization of Eastern Caribbean States (OECS). Beyond these formal arrangements, Turkey actively engages with several parliamentary and consultative platforms, including the Central American Parliament (PARLACEN), the MERCOSUR Parliament (PARLASUR), the Parliamentary Confederation of the Americas (COPA), the Forum of Presidents of Legislative Bodies of Central America and the Caribbean (FOPREL), and Parliamentarians for the Americas (ParlAmericas), enhancing its diplomatic influence thereby and fostering political alliances across the region. Institutionally, too, Turkey has signalled its commitment by establishing a dedicated LAC Directorate within the Foreign Economic Relations Board (Dış Ekonomik İlişkiler Kurulu-DEİK), decoupling its operations from the North American division to create a standalone regional focus. This move acknowledged Turkey’s special cultural and strategic interest and promises more focused engagement with LAC. 

The Turkish Touch: Cultural and Humanitarian Diplomacy

…cultural impact is also evident in the popularity of “the Turkish name “Elif”, which became one of the most common names for newborns in Chile in 2016, surpassing traditional names such as Loreto and Veronica.

At the same time, Turkey’s engagement in LAC extends beyond trade and diplomacy into the realm of soft power, encompassing mass media, humanitarian aid, religion, and education.

Firstly, Turkish TV series have emerged as a key cultural diplomacy tool. For example, in Chile, “the Turkish series 1,001 Nights was the most-viewed program in 2014”, contributing to a 70% increase in tourists, particularly from Argentina and Brazil, with numbers reaching 165,000 by August 2018. The series’ cultural impact is also evident in the popularity of “the Turkish name “Elif”, which became one of the most common names for newborns in Chile in 2016, surpassing traditional names such as Loreto and Veronica”. Moreover, media expansion serves to reinforce this cultural influence. Notably, the TRT External Services Department launched TRT Español and TRT Português, while Anadolu Agency opened an office in Bogota.

Humanitarian diplomacy is another cornerstone of Turkey’s soft power. Through TİKA (Turkish Cooperation and Coordination Agency), Turkey integrates long-term development into disaster relief, implementing over 400 projects across education, healthcare, agriculture, and infrastructure by 2022, with programme offices in Mexico and Colombia. 

Humanitarian diplomacy is another cornerstone of Turkey’s soft power. Through TİKA (Turkish Cooperation and Coordination Agency), Turkey integrates long-term development into disaster relief, implementing over 400 projects across education, healthcare, agriculture, and infrastructure by 2022, with programme offices in Mexico and Colombia. Turkey’s development aid reached 0.95% of its Gross National Income (GNI) in 2021, surpassing the UN target of 0.7% and placing the nation second in the global rankings. This strategy underscores that humanitarian assistance cannot only coexist with diplomatic efforts; it can also strengthen them. Just as individuals appreciate support in times of crisis, so states respond positively to meaningful aid, which fosters both trust and deeper cooperation.

Third, Turkey leverages cultural and religious diplomacy. It has pursued a “build a mosque first” strategy with a view to fostering closer ties with Muslim communities in LAC and positioning itself as a protector of the Islamic world; for instance, it has proposed the construction of a mosque in Cuba. Fourthly, soft power initiatives have touched on the educational realm. Specifically, Turkey has promoted initiatives including scholarship programs and bilateral educational agreements, including those it has signed with Nicaragua. These initiatives have produced measurable outcomes, with 625 students from the region supported to date, including 294 who are currently studying in Turkey.

A Contested Space: Turkey’s Challenges and limits in Latin America

…competition from other powers aiming to strengthen their influence in the region, particularly China, the European Union, and the United States, which considers LAC part of its vital space. 

Alongside its growing engagement in LAC, Turkey has faced competition from other powers aiming to strengthen their influence in the region, particularly China, the European Union, and the United States, which considers LAC part of its vital space. Αs shown in Table 1, the steady influx of Foreign Direct Investment (FDI) into the region highlights China as a particularly strong competitor. Two-way trade between China and the CELAC bloc stood at $515 billion in 2024, according to Chinese customs data, up from $450 billion in 2023 and just $12 billion in 2000.

Second, the EU, after limited success with interregional agreements in the 1990s, has refocused through the Global Gateway initiative and pledged €45 billion in investments through 2027, with a focus on strategic sectors—such as digitalization, climate and energy, transport, health, education, and research (Table 4)—that match the key concerns of LAC citizens (Table 2). Furthermore, it is leveraging its reputation as a “best partner”, particularly in environmental policies and the reduction of social inequality (Table 3). Last but not least, the United States remains a dominant player, with $567 billion in goods traded in the first half of 2023 coupled with a 38% of regional FDI, largely concentrated in Brazil and Mexico.

Furthermore, the EU-MERCOSUR trade agreement, which was finally signed in January 2026 after more than 25 years of negotiations, represents a recent milestone in the EU’s growing influence. This comprehensive agreement creates one of the world’s largest free trade areas, covering industrial goods, agriculture, and services. While Turkey is not party to the EU-MERCOSUR agreement, it is affected indirectly through its customs union with the EU, which requires the alignment of external tariffs for industrial products. Hence, the tariff reductions on industrial goods traded between the EU and MERCOSUR countries also apply to Turkey, providing indirect benefits for Turkish exports of machinery, chemicals, and transport equipment. However, agricultural products and services remain outside the customs union, limiting Turkey’s ability to capture benefits in these sectors without separate bilateral negotiations. The agreement also strengthens EU agricultural exports through tariff-rate quotas for sensitive products such as beef, poultry, and sugar, while safeguarding domestic European markets from sudden import surges. 

Ambition Meets Reality: The Limits of Turkey’s Reach in Latin America and the Caribbean

Turkey’s interactions with LAC can be viewed in the context of an increasingly multipolar world, in which emerging powers compete for influence and diversify their alliances. Despite Ankara’s wild ambitions, its capacity in the region faces structural constraints. Turkey’s economy is facing several serious problems which limit its ability to sustain large and ambitious diplomatic and military projects. Geographically, the distance to LAC creates logistical challenges: trade requires long shipping routes, military cooperation is costly, and consistent diplomatic follow-up hard.

Turkey frequently resembles Tolkien’s Barad-dûr, the Black Tower of Sauron, which has a powerful but single and overextended eye that can project an intense focus, but only on one major theatre at a time.

Politically, Turkey faces a heavy agenda, which includes having to manage complex issues in the Eastern Mediterranean, the Middle East, and the Caucasus, while simultaneously navigating its relations with the EU and Russia—all of which demand constant attention and resources. In this regard, Turkey frequently resembles Tolkien’s Barad-dûr, the Black Tower of Sauron, which has a powerful but single and overextended eye that can project an intense focus, but only on one major theatre at a time. However, LAC demands consistent focus, not sporadic visibility.

Turkey’s governance model is another challenge It is assertive, personalized, and at times confrontational. As a result, it may work well with political figures like Bukele and Maduro. but appeal less to governments that value autonomy and democratic norms. Regardless of its two decades of political engagement, Turkey lacks deep historical, linguistic, or religious ties with LAC, and long-term investment is going to be required if Ankara is to continue growing its influence.

Soft power, a key tool for Turkey globally, faces limitations in LAC. Unlike in sub-Saharan Africa (South Africa, Uganda, Ethiopia etc) or the Middle East, where mosque-building and its role as “protector of Islam” enhance influence, Muslims in LAC constitute only 0.1% of the population. The effect of TV series is significant, but cannot be lasting unless more work is done. Lasting impact depends on meaningful engagement, such as humanitarian projects, development, education, and capacity-building projects,—e.g. the project in Suriname building irrigation system capacity.

To remain influential and surpass these limitations, Ankara must act steadily, track public perceptions on global issues in LAC.

To remain influential and surpass these limitations, Ankara must act steadily, track public perceptions on global issues in LAC (Table 2), and engage both major (Brazil, Argentina etc.) and smaller powers in order to secure a place for Turkey among the Perceived Best International Partners for Cooperation in Key Policy Areas (Table 3).

Taken together, these constraints show that Turkey’s ambitions in LAC face clear limitations, stemming from economic volatility, geographic distance, diplomatic overstretch, and weak cultural roots. But is it all doom and gloom? 

Table 1: Distribution of Foreign Direct Investment Inflows into Latin America and the Caribbean (11 Countries), by Origin, 2015–2023

 

Table 2: Public Perceptions of Global Problems in Latin America, by Priority (%)

Source: Latinobarómetro and Friedrich Ebert Foundation, “What Are Latin America’s Perceptions on the European Union?” (Survey, 2021), 7, data.nuso.org.

Table 3: Perceived Best International Partners for Cooperation in Key Policy Areas, by Public Opinion (%)

Source: Latinobarómetro and Friedrich Ebert Foundation, “What Are Latin America’s Perceptions on the European Union?” (Survey, 2021), 34, data.nuso.org.

Table 4: EU-Latin America and Caribbean Investment Agenda under Global Gateway

Source: “Source: European Commission, “EU-Latin America – Global Gateway projects examples”, Infographics, July 2023, Eurostat/GISCO, accessed February 23, 2025.”

 

Turkey’s Playbook: Is it Working?

What is Turkey seeking to achieve in LAC, and to what extent is it succeeding? More importantly, can Turkey’s initiatives enable it to assert influence and punch above its weight in a region increasingly dominated by larger geopolitical actors?

If Turkey is measured against its own past engagement, then the answer is positive. The numbers state this loud and clear.

The answer depends on the benchmark. If Turkey is measured against its own past engagement, then the answer is positive. The numbers state this loud and clear: under its Latin America and Caribbean Action Plan, Türkiye has tripled its diplomatic presence, while bilateral trade has surged fifteenfold. By these metrics, the playbook is working. However, when Turkey is compared to major competitors such as China, the United States, and the European Union, the picture is somewhat different. To assess whether Turkey’s playbook is working in these terms, it is first necessary to examine the concrete gains it has achieved in the region. These gains can be broadly grouped into three interrelated dimensions: the economic, the political, and the cultural.

Turkey’s diplomatic missions in LAC function as symbols of presence, but also as active hubs of economic diplomacy which facilitate high-level meetings, business delegations, and investment coordination.

Embassies are both politically and economically beneficial. Turkey’s diplomatic missions in LAC function as symbols of presence, but also as active hubs of economic diplomacy which facilitate high-level meetings, business delegations, and investment coordination. For instance, in El Salvador, embassy-supported engagements between Turkish firms, DEİK, and local authorities have helped generate memoranda of understanding that have advanced major projects, including the $1.6 billion port expansion by Yilport Holding, as well as facilitating the exploration of trade and investment prospects across multiple sectors. Similar embassy-backed business dialogues in Cuba have strengthened private trade contacts.

Politically, Turkey’s engagement in regional institutions such as CARICOM, MERCOSUR, the OAS, and CELAC has elevated its international profile and generated tangible gains, including robust LAC support for Turkey’s non-permanent seats on the UN Security Council in 2009–2010 and 2015–2016. This institutional visibility has also helped Ankara build regional backing for key foreign policy priorities, particularly the Palestinian cause. In 2019, President Erdoğan publicly thanked Bolivian President Evo Morales, stating “I thank Bolivia for its support of the Palestinian cause, particularly with regard to the status of Jerusalem and the protection of Palestinian civilians.” This alignment intensified after the 7 October 2023 Hamas attacks and subsequent Israeli reprisals, when countries such as Belize, Chile, Colombia, Honduras and Bolivia opted to adopt positions sharply critical of Israel, with Colombian President Gustavo Petro explicitly describing the situation as a “genocide”.

Turkey’s rhetoric and its foreign policy choices have positioned it as an alternative pole vis-à-vis the West, and especially the United States.

A further gain stemming from Turkey’s regional playbook lies in political recognition. By treating smaller and medium-sized Latin American states as meaningful partners, Ankara, a G20 country, enhances these states’ visibility; this reinforces their notion of being heard, while forging positive perceptions of Turkey as a respectful and accessible partner. At the same time, both Turkey’s rhetoric and its foreign policy choices have positioned it as an alternative pole vis-à-vis the West, and especially the United States. Several LAC governments view Ankara as a sympathetic actor in multilateral forums, especially vis-à-vis sanctions and external pressure. Turkey has consistently opposed such measures, rejecting sanctions against Nicaragua in 2021 and criticizing the U.S. embargo on Cuba. This stance reinforces perceptions of Turkey as a more understanding and solidaristic partner than larger powers, providing Turkey with domestic gains as it is perceived as the protector of the “weak”.

Socially, Turkey has built a favourable image in LAC through the popularity of its television series, which offer narratives and values distinct from Western models and have indirectly boosted tourism. Furthermore, by providing aid and development assistance, it not only improves local living conditions but also generates diplomatic and reputational capital at relatively low cost. Furthermore, by promoting the idea of Turkey as the global protector of Islam and attempting to bring Muslim communities in the region within its sphere of influence, Turkey gains additional domestic legitimacy while countering competition from other Muslim-majority countries pursuing similar agendas.

But can Turkey truly punch above its weight? The short answer is: not yet. It can rival neither China’s massive economic investment in the region, nor the United States entrenched political and economic influence, nor the European Union’s combination of financial resources and normative power. So, the key question is not simply what Ankara has achieved but how a middle power like Turkey is to stand out in LAC amidst giants like China, the US, and the EU. Turkey’s playbook, smart diplomacy, targeted economic initiatives and niche soft power provides some answers, but there are limits on what they can achieve. By studying these successes and constraints, other states can also craft tailored strategies to engage the region more effectively.

Conclusion 

Turkey’s engagement with LAC exemplifies how a middle power can expand its influence in a distant, multipolar region through a combination of economic diplomacy, political outreach, and cultural soft power. Over the past two decades, Ankara has achieved impressive results: trade has grown exponentially, diplomatic representation has multiplied, and cultural initiatives, from television series to humanitarian programmes, have cultivated visibility and goodwill. Turkey has effectively demonstrated that strategic, tailored engagement can yield tangible benefits even from afar. Its successes often rely on niche strategies, such as prioritizing smaller states, leveraging humanitarian aid, or promoting an “anti-imperialist” discourse as a protector of the weak.

Yet Turkey also illustrates the limits of ambition: geographic distance, economic volatility, and competition from global giants constrain its capacity to dominate. For third-party countries, Turkey’s playbook offers dual insights: first, it illustrates the importance of tailored strategies; and second, it demonstrates that influence is built over time through consistent engagement, an institutional presence, and the cultivation of trust-based relationships, rather than through short-term projects or opportunistic diplomacy.

Ultimately, Turkey’s experience reveals deeper lessons about contemporary global engagement based on state capacity. While it is difficult to compete with the superpowers in the arena, middle and smaller powers can still carve out meaningful influence for themselves through a combination of economic pragmatism, cultural resonance, and diplomatic creativity. With its diverse states, developmental needs, and desire for balanced partnerships, Latin America presents fertile ground for such strategies. But success demands patience, sustained investment, and the humility to recognize limits while leveraging unique advantages. In the 21st-century multipolar arena, Turkey’s journey offers a blueprint not just for expanding influence, but for doing so in a way that is adaptable, resilient, and strategically coherent. As the father of soft power Joseph Nye once said: “Power does not lie in brute strength, but in the ability to shape the preferences of others.”

On January 20, 2026, ELIAMEP held an event entitled “Climate Resilience in Islands and Local Government” at the Hellenic-American Union, as part of the European Pathways2Resilience program, under the guidance and supervision of ELIAMEP’s scientific coordinator for the SMILE project, Professor Emmanuella Doussis, Head of the Climate and Sustainable Development Programme. A total of more than 20 speakers from the scientific community, policy makers, municipal representatives, and social partners participated with the aim of strengthening public dialogue on climate change in island regions and the role of local government in addressing it.

The discussion focused on the conceptual foundations of climate resilience and their interpretation through the lens of the specific characteristics of insularity. Small scale, geographic isolation, intense tourism pressure, uncontrolled construction, depletion of natural resources, and the lack of critical infrastructure render islands more exposed to climate risks and limit their adaptive capacity.

Particular emphasis was placed on the crucial role of local authorities, which manage key policy areas directly linked to climate resilience, such as flood risk management, infrastructure maintenance, prevention of environmental degradation, and response to extreme events. At the same time, it was highlighted that municipalities’ proximity to local communities and the experiential knowledge they possess can strengthen adaptation planning, risk assessment, and the legitimacy of interventions.

A significant part of the discussion was devoted to whether the existing institutional, administrative, and financial framework enables Local Government to effectively perform this role, particularly in island areas. Despite the transfer of critical competences, the lack of adequate resources, technical support, and administrative capacity-building remains a major obstacle.

The event highlighted as a central conclusion that prevention and the strengthening of resilience in island communities require a holistic approach and cooperation among the scientific community, local authorities, institutions, and citizens. In an environment of an intensifying climate crisis, timely action is a critical factor in limiting impacts and enhancing the resilience of islands.

Many of these issues are also addressed in the ELIAMEP policy paper entitled “Climate Resilience in Island Regions and Local Government”, authored by Othon Kaminiaris, Expert on Environment and Climate Change at the Ministry of Foreign Affairs; Research Associate, ELIAMEP, and Artemis Androni, International Development Advisor.

The full text of the paper is available here, and its executive summary is available here (in Greek).

 

President Trump’s economic policy has disrupted global trade by imposing high tariffs and generating sustained uncertainty for partners. The European Union is among the most exposed actors. To assess its strategic options, this policy note interprets this trade policy as an interactive reform process rather than a coherent economic doctrine.

That tariff policy follows a non-linear pattern, characterised by abrupt shifts, shifting coalitions of domestic winners, and limited reliance on institutional expertise. Rather than reflecting a stable economic strategy, tariffs function as a tool of political realignment and bargaining leverage. This dynamic creates persistent analytical uncertainty, complicating the response of allies and markets.

By following a reform-process approach, the note identifies the political logic, distributional effects, and structural weaknesses of the tariff strategy. Understanding these features will help assess and inform the EU’s policymaking strategy and frame the broader policy discourse in an unstable trade order.

Read here in pdf the Policy paper by Angelos Karayannopoulos, Junior Research Fellow, ELIAMEP.

Introduction

Emanating from this uncertain landscape, policies associated with “Trump Tariffs” have been challenging to analyse, as they represent a rather ongoing process.

The Trump Administration 2.0 trade policy has been defined by uncertainty. Uncertainty was first generated in the first months of the Administration by the unprecedented shift in the global economic order, adopting a protectionist-leaning trade policy that questioned the very foundations of the world trade system. Along the way, uncertainty was fuelled by repeated, often contradictory announcements, delays in implementing decisions, revisions, ongoing negotiations, and relapses in escalations of aggression vis-à-vis trade partners and competitors. Emanating from this uncertain landscape, policies associated with “Trump Tariffs” have been challenging to analyse, as they represent a rather ongoing process.

Several studies have tried to estimate the economic implications. According to modelling by Yale’s Budget Lab, the tariffs implemented through October 2025 are projected to result in a short-term increase in consumer prices of approximately 1.3%. Furthermore, it is anticipated that annual GDP growth will decrease by approximately 0.5% between 2025 and 2026. The impact of these tariffs varies across sectors, with prices for clothing, leather goods, and metals rising by 28% to 40%. In the long term, the economy is forecast to be approximately 0.4% smaller, equivalent to about $125 billion annually. By the end of 2025, unemployment is expected to increase by 0.3 percentage points, with a further 0.7 percentage point increase by 2026.

Figure 1: U.S Average Effective Tariff Rate Since January 1, 2025

Source: The Budget LabSource: The Budget Lab analysis. Created with Datawrapper

Although this process appears to have entered by October 2025 a more structured phase, where actors involved already expect at least minimum consequences from the new era of US-led trade protectionism, it is necessary to put this process into a frame in which we can better analyse the associated consequences and response strategies from actors directly affected. Regarding the EU, the European Commission had initially drafted a €26 billion counter-tariff package but froze it amid a temporary 90-day truce announced by Washington. The “Turnberry deal” that followed capped US tariffs on most European exports at 15 per cent, half of what had been threatened, but kept the 50 per cent duties on steel and aluminium firmly in place. Brussels framed the compromise as “the best possible under the circumstances”, though few viewed it as a victory. France’s then Prime Minister called it “a dark day for transatlantic trade”, while Germany and Italy quietly accepted it as damage control. The asymmetry of the arrangement, Europe cautious, Washington defiant, seems to reflect a broader strategy within Trump’s circle, which leverages uncertainty and unpredictability.

Equally salient is the tariff regime’s standing under the World Trade Organisation (WTO). Several measures are plainly inconsistent with US obligations under WTO rules, and that institutional mismatch matters for two reasons. First, it signals to other actors that rules can be subordinated to unilateral leverage, thereby amplifying global uncertainty. Second, it also opens a parallel front of response, allowing partners to challenge the policy through WTO litigation, to coordinate pressure via new coalitions, or even to pursue alternative rule-making outside the traditional multilateral framework.

By breaking from previous tariff norms, the US signals both a shift in bargaining strategy and an intention to reshape the underlying logic of global trade engagement.

So while many viewed the Turnberry deal as a setback for Europe, its more profound significance is that it represents a fundamental rupture in the post-war global economic order, one whose elements remain blurry and purpose ambiguous. This rupture challenges the post-1945 framework of multilateral trade rules, embedded reciprocity, and predictable dispute-resolution mechanisms that have historically underpinned transatlantic commerce and investment flows. By breaking from previous tariff norms, the US signals both a shift in bargaining strategy and an intention to reshape the underlying logic of global trade engagement.

Understanding this rupture and its purpose, however, first requires taking a step back: how did this policy come about in the first place? Who supports this policy, whose interests are at stake? How, then, is this reform of the fundamental trade dogmas evolving, and what lessons can friends and foes acquire from this process? Answering these questions is critical because reforms of this magnitude cannot be assessed solely through economic metrics; they are embedded in complex political dynamics, institutional constraints, and the distributional consequences that define domestic and international legitimacy. It is not easy to assess both the US emerging context and the EU’s response strategy without first answering these fundamental questions. Failing to identify actors, coalitions, and underlying motivations risks misinterpreting both the policy’s logic and its potential outcomes.

It is thus crucial to frame the new tariff policy within a reform-process approach, assessing not only the policy instruments themselves but also how they were conceived, communicated, and implemented. Viewing the policy in this way allows for a nuanced understanding of how reforms evolve under uncertainty.

Reform Assessment 

Characteristics 

Like taxes, tariffs redistribute economic resources across sectors, firms, and households, creating both beneficiaries and those who bear direct or indirect costs. […] Its success thus depends not only on technical design but also on credible leadership and public trust.

Changes in tariffs resemble tax reforms, and tax reforms are “inherently difficult and a politically charged process”[1]. Like taxes, tariffs redistribute economic resources across sectors, firms, and households, creating both beneficiaries and those who bear direct or indirect costs. They are not neutral interventions; instead, they restructure incentives, alter market signals, and can produce knock-on effects across supply chains and consumer prices. This kind of reform encounters resistance from entrenched interests, including both domestic producers and import-dependent industries, which may lobby vigorously to protect their positions. Its success thus depends not only on technical design but also on credible leadership and public trust. In the US, where trust in public institutions stands at around 34% (OECD, 2024), this creates an additional obstacle: low confidence in governance amplifies scepticism, encourages political polarisation, and increases the likelihood of compliance gaps or public backlash. Consequently, any attempt to impose fundamental tariff reforms must begin with precise attention to both policy design and the clarity of its stated purpose. Clear objectives are essential to overcoming institutional friction and aligning stakeholders around a shared understanding of the reform’s objectives.

Donald Trump’s electoral victory in November 2024 reshaped the political landscape, creating the conditions for a new wave of policy experimentation. Among these, tariff reform emerged through a “window of opportunity”[2] in which public dissatisfaction with globalisation (problem), protectionist ideas (policy), and a nationalist political climate (politics) converged.

Donald Trump’s electoral victory in November 2024 reshaped the political landscape, creating the conditions for a new wave of policy experimentation. Among these, tariff reform emerged through a “window of opportunity”[2] in which public dissatisfaction with globalisation (problem), protectionist ideas (policy), and a nationalist political climate (politics) converged[3]. These “windows” are critical junctures in reform theory, representing periods when political, societal, and economic conditions align to allow for initiatives that entrenched interests might otherwise block. Trump, acting as a “policy entrepreneur”, seized this moment with a symbolic solution of high political appeal but low economic coherence, illustrating how political incentives often outweigh technocratic rationality in such contexts. Policy entrepreneurs are actors who mobilise attention and resources to attach specific policy ideas to these moments, shaping both the content and timing of reforms in ways that resonate with their political base. Such reforms rarely succeed. Trump Tariffs, too, seem unlikely to achieve the economic goals the Administration attaches to them in the short- to medium-term. Still, they serve as a strategic move to generate negotiation leverage. 

Figure 2: Trump’s Window of Opportunity

 

 Source: Author’s illustration, based on Kingdon (1984) and Aberbach & Christensen (2014).

 

The reform’s uncertainty stems from a lack of a coherent strategy understood by both experts and the actors involved. Uncertainty in this context arises from both the ambiguity of stated goals and the erratic sequencing of policy measures, leaving stakeholders unable to anticipate outcomes or plan accordingly. In his political economy framework, Rodrik (1993) emphasises that “identifying who benefits and who bears the costs is essential while assessing a reform”[4]. Without this mapping, policymaking risks misallocating support, generating opposition, and undermining credibility. For tariffs, this translates into narrow, fragmented domestic coalitions: producers of protected goods may celebrate immediate gains, while consumers, downstream industries, and exporters face hidden or delayed costs. When this distribution is unclear, reforms are often blocked, diluted, or derailed entirely, as competing interests contest both the measure’s legitimacy and its impact.

Trump’s policy design and objectives appear less economic than political, aimed at creating leverage in international trade negotiations and consolidating support from key domestic actors.

Furthermore, economists tend to attribute deviations from efficiency to vague “political motives”[5], thus overlooking the complex political dynamics that actually shape reform adoption and durability. In this case, however, Trump’s policy design and objectives appear less economic than political, aimed at creating leverage in international trade negotiations and consolidating support from key domestic actors. In other words, tariffs act less as calibrated economic instruments and more as signals to allies, competitors, and the domestic base, serving as a deliberate policy to structure perceptions and incentives rather than to correct market failures.

…“bring back manufacturing” can therefore gain traction not because it resolves a clearly defined economic problem, but because it fits a political narrative, is available at the right moment, and mobilises relevant constituencies.

These characteristics reflect what Aberbach and Christensen (2014) describe as a “high-ambiguity reform model”, often referred to in the academic literature as the “garbage-can” model of policymaking. The term is not normative but technical, denoting decision-making processes in which problems, solutions, and political attention move in parallel rather than sequentially. In such environments, solutions are often pre-packaged, and policy choices emerge when these elements temporarily coincide. A measure such as “bring back manufacturing” can therefore gain traction not because it resolves a clearly defined economic problem, but because it fits a political narrative, is available at the right moment, and mobilises relevant constituencies. This places the reform closer to a symbolic or narrative-driven act than a carefully calibrated economic intervention. Tariffs, in this sense, function performatively, shaping public discourse, signalling resolve internationally, and activating domestic coalitions even when their economic effects remain uncertain.

Altogether, the US Administration appears to clearly follow a highly “interactive model” of reform, in which policies evolve during implementation and are prone to being shaped by reactions from key stakeholders[6]. And this is a key understanding for friends and foes: in this interactive framework, policymaking is iterative rather than linear. This means that initial designs are adjusted in response to feedback from markets, industry lobbies, unions, or foreign governments. Here, the stated goals are vague but politically salient: restore domestic manufacturing, reduce trade deficits, decouple from China, and negotiate better deals with strategic partners. However, consistent with interactive models, implementation has been non-linear, marked by continuous redefinition, resistance, and episodes of market turbulence. Internationally, such unpredictability pressures partners to return to the negotiating table, potentially increasing the US’s bargaining power, as observed in engagements with the EU, among others. Domestically, however, outcomes are uneven. The interactive process produces winners and losers who may not align neatly along predictable lines, leaving policy outcomes contingent on power, influence, and negotiation skill. Who, then, are the key actors shaping this interactive process? Understanding their networks, incentives, and access to the administration is critical to forecasting the trajectory of Trump’s trade policy.

Actors and coalitions

Tariffs activated interest groups according to their economic and political leverage. Table 1 outlines the key leading actors and stakeholders in this process, illustrating their positions and the tensions that define the interactive model.

But who actually holds influence over the President? To understand the political motivations behind this reform, it is necessary to identify and monitor the coalition driving it.

Table 1: Key Actors and Coalitions Overview

Category Group/Actor Interest/Position Relevance Winners Certain US manufacturers (e.g., steel, aluminium) Support protectionist policies to reduce foreign competition Gain temporary market advantage; politically vocal Certain labour unions (e.g., UAW) Tentative support; hope to preserve jobs in targeted sectors Provide political legitimacy to tariffs Losers Consumers Face higher prices and a reduced variety of goods Broad-based economic impact, especially on low-income groups Retailers (e.g., Walmart, Amazon) Disrupted supply chains; higher costs Large employers and lobbyists are against tariffs Automotive industry (e.g., Ford, GM) Costlier production due to tariffs on parts Influence industrial policy and public debate Farmers Victims of retaliatory tariffs on exports Politically sensitive group Key Stakeholders Financial Sector (e.g., investment banks, Wall Street) Oppose trade instability; favour predictability and open markets Indirect but consequential influence through market reactions and lobbying E-commerce platforms (e.g., Shein, Temu) Affected by the de minimis rule changes Pushback through lobbying and legal channels US government/trade agencies Set and enforce tariff policy Shape the direction of the protectionist agenda

In theory, competing coalitions shape reform by leveraging resources and legitimacy to promote solutions and influence institutional arenas[7]. In this case, traditional pro-trade voices, such as consumer groups, major retailers, and the automotive industry, have been sidelined. Instead, a new “design coalition”[8] has emerged, uniting protectionist advisors, domestic steel and aluminium manufacturers, and labour unions like the United Auto Workers. This coalition strategically framed the tariffs as a patriotic move to revive American manufacturing, aligning with Trump’s agenda. Their ability to displace established advisory bodies and bypass expert consultation equally reflects the shift toward the interactive model, one that rewards salience, symbolism, and strategic positioning over traditional deliberation. Yet, it does not guarantee success.

At the centre of Trump’s new trade coalition stands Peter Navarro, reinstated as Senior Counsellor for Trade and Manufacturing. Navarro functions less as a bureaucrat than as a strategic ideologue. His framing of “reciprocal tariffs” as a question of fairness rather than efficiency has again struck a chord with the president. In practice, Navarro supplies both the conceptual blueprint and the political language of protectionism. His constant proximity to Trump, through Oval Office briefings and media coordination, gives him unparalleled access and agenda-setting power.

Around him operates a small circle of ideologues, including Miran, whose recent work provides the intellectual scaffolding for the new tariff rationale. In his paper “A User’s Guide to Restructuring the Global Trading System” in November 2024, Miran outlined a comprehensive plan to redesign global trade rules. His approach treats tariffs not as fiscal tools but as instruments of structural correction, meant to revive America’s industrial capacity, which he argues has been hollowed out by decades of asymmetric globalisation. At the core of his diagnosis lies a perceived distortion in the international monetary order: the US dollar’s reserve status, while conferring global privilege, simultaneously undermines US competitiveness by sustaining an overvalued currency. The outcome, in his view, is a chronic trade imbalance that erodes manufacturing and widens socio-economic divides in America’s industrial heartlands.

It is worth noting, however, that Miran’s blueprint ends with a sober caveat, stating that “[t]here is a path by which the Trump Administration can reconfigure the global trading and financial systems to America’s benefit, but it is narrow, and will require careful planning, precise execution, and attention to steps to minimise adverse consequences. This disclaimer matters because the administration’s rollout shows the opposite mix, and the mismatch between a disciplined intellectual roadmap and ad hoc managerial practice helps explain why a fragile path to systemic change has, so far, become a broad avenue of organisational failure.

Going back to the actors behind the new tariff regime, implementation largely falls to Howard Lutnick, the new Secretary of Commerce. A financier by background, Lutnick serves as the operational pillar of the administration’s trade structure. Once Navarro’s concepts gain presidential approval, they are translated into policy through the Commerce Department. Lutnick oversees the tariff schedule, exemption mechanisms, and enforcement procedures. He also maintains regular contact with industrial lobbies, particularly in autos, steel, and energy, to apply pressure and align protectionist measures with domestic business interests. Less ideological than Navarro but equally loyal to Trump, Lutnick’s strength lies in execution. His role ensures that ideology becomes administrative and that campaign slogans become regulatory instruments.

Bridging these two spheres is Jamieson Greer, the US Trade Representative (USTR). A veteran of the first Trump administration, Greer now serves as the system’s legal and diplomatic interface. His office formalises tariff actions in more proper language, manages negotiations, and integrates political objectives into trade agreements. In the July 2025 deal with the EU, Greer coordinated the partial rollback of auto tariffs in exchange for European concessions on LNG imports and investment flows.

Navarro dominates moments of escalation, crafting slogans and recasting Europe as an “unfair trader”. Greer intervenes during negotiations to codify those impulses into agreements. Lutnick, meanwhile, ensures continuity by translating presidential instinct into policy routines. Together they form a vertically integrated chain of influence: Navarro provides doctrine, Greer manages diplomacy, and Lutnick enforces implementation. 

Navarro dominates moments of escalation, crafting slogans and recasting Europe as an “unfair trader”. Greer intervenes during negotiations to codify those impulses into agreements. Lutnick, meanwhile, ensures continuity by translating presidential instinct into policy routines. Together they form a vertically integrated chain of influence: Navarro provides doctrine, Greer manages diplomacy, and Lutnick enforces implementation. This inner circle has marginalised moderating voices from the National Economic Council and the Treasury, both of which were diminished in Trump’s second term. The balance of power has thus shifted decisively toward the protectionist bloc. This configuration makes further tariff escalation with the EU not only plausible but structurally embedded in the administration’s policymaking logic. In this structure, however, it is worth remembering that Trump remains the final arbiter, shaping policy-making through personal, isolated decisions, often controversial and often isolated from expert advice.

In addition, by sidelining the dominant channels of economic expertise and despite a broad consensus on the tariffs’ economic harm, this coalition has already achieved a significant political and paradigmatic shift in the US economic policymaking. 

In addition, by sidelining the dominant channels of economic expertise and despite a broad consensus on the tariffs’ economic harm, this coalition has already achieved a significant political and paradigmatic shift in the US economic policymaking. This raises questions about the policy’s stability, as in democratic settings, experts serve dual roles: they inform decisions and foster clarity in public debate[9]. Both functions have been absent here. Beyond this coalition, key actors around economic and trade policy oppose the reform, and others, including  Secretary of the Treasury Scott Bessent, have struggled to justify the policy or predict its distributional effects. This cleavage creates further confusion about the policy’s implications, raising questions about the polarised, highly top-down nature of the reform strategy. Moreover, reform political theory shows that this kind of exclusionary policymaking rarely delivers sustainable outcomes. In particular, citizen participation[10] and local knowledge[11] help legitimate such complex reforms, such as tariffs. In the US, due to low levels of trust, such inclusive mechanisms were more necessary but absent, with decisions driven by a closed executive circle. Taken together, the lack of deliberation, marginalisation of experts, and political opacity already undermine the reform’s legitimacy and long-term success as much as its questionable economic rationale.

Domestic and Ideological Ecosystem

Beyond the White House’s inner circle, Trump’s trade strategy rests on a broad and uneven domestic ecosystem, an assemblage of industrial lobbies, labour organisations, and ideological networks that together provide legitimacy, pressure, and political reinforcement. 

Beyond the White House’s inner circle, Trump’s trade strategy rests on a broad and uneven domestic ecosystem, an assemblage of industrial lobbies, labour organisations, and ideological networks that together provide legitimacy, pressure, and political reinforcement. This coalition functions less as a single bloc than as a layered structure in which manufacturing, energy, and conservative policy circles converge around a shared narrative.

At its foundation lie the manufacturing and energy sectors, the backbone of Trump’s tariff constituency. Groups such as the Coalition for a Prosperous America (Zach Mottl) and the Alliance for American Manufacturing (Scott Paul) have welcomed the 2025 measures as a long-overdue “reset” to restore industrial competitiveness. Steel producers were among the first to rally. The Steel Manufacturers Association (Philip Bell), the American Iron & Steel Institute (Kevin Dempsey), and major firms, including US Steel, Nucor, and Cleveland-Cliffs, all endorsed the revival of Section 232 tariffs, describing them as essential to counter global overcapacity. Their alignment with the administration has not been incidental: the sector’s strategic and symbolic role as “industrial America reborn” anchors Trump’s economic narrative. Support has also come from adjacent industries. The United Auto Workers union, representing roughly 400,000 workers, called tariffs “a victory” in the effort to reshore jobs. In contrast, construction, energy, and agricultural associations are more wary of this reform, with different interests taking different approaches towards the White House. Finally, the labour union federation AFL-CIO expressed caution, warning that “tariffs without a plan will lead to economic harm” and insisting on parallel industrial and labour-market policies.

Behind this patchwork of sectoral interests lies an organised intellectual infrastructure that sustains the administration’s economic nationalism. The Heritage Foundation’s Project 2025 serves as its doctrinal anchor, describing the trade policy central to the renaissance of the American manufacturing and defence industrial base, and advocating a tariff regime built on “reciprocity”. Similar lines emerge from another key think-tank behind Trump’s agenda, the American Compass, led by economist Oren Cass, which hailed the tariff plan as proof that “the disastrous WTO era” has ended.

A combination of actors inside and outside the government has created the coalition driving this delicate reform, which aims at changing the very foundations of the post-war economic apparatus.

Hence, we can monitor how the driving coalition’s coordination across this ecosystem unfolds through both formal and informal channels. A combination of actors inside and outside the government has created the coalition driving this delicate reform, which aims at changing the very foundations of the post-war economic apparatus. Still, the coalition remains largely fragile. Market reactions to new tariffs have been volatile, and consumer groups, investors, and US allies continue to express unease. Even sympathetic voices warn that protectionism without parallel industrial policy risks hollowing out its own social base. The architecture of Trump’s trade coalition shows adequate coherence at the top but fragmentation below, confirming the hypothesis that the system is held together less by institutional design than by political momentum.

Collective assessment

Having mapped the key actors and interests driving the tariff agenda, the next step is to consolidate this information within an analytical framework that can capture both the politics and the process. The framework developed by Marsh and McConnell (2010)[12] offers precisely such a lens. Conceived to evaluate public policy success in multidimensional terms, it moves beyond the binary of “success or failure” to assess how political, programmatic, and process elements interact over time. Rather than treating outcomes as fixed, it sees them as fluid, being constantly shaped by institutions, coalitions, and shifting perceptions of legitimacy. This approach is beneficial for analysing reforms like Trump’s tariff programme, whose logic is as much political as it is economic.

In this model, political success reflects a policy’s ability to generate and sustain support among key constituencies. Tariff reform meets this criterion only partially. It resonates with Trump’s electoral base by framing trade as a question of sovereignty and fairness, yet polls show declining approval among moderates and business-oriented Republicans. Programmatic success, in turn, refers to the policy’s effectiveness in achieving its stated goals and addressing the problem it was designed to solve. Here, the record is weaker: the tariffs have increased costs and uncertainty, while their contribution to reshoring remains limited. Implementation thus becomes crucial, weighing as both a technical and a political variable in our assessment. In a context of multiple rates, country-specific carve-outs, and intricate rules of origin, customs administrations face heavy demands that strain their systems. Where capacity gaps exist, complexity invites uneven enforcement, discretionary arbitrage, and, in extreme cases, rent-seeking; incoherence thus mutates into additional risk. Finally, process success measures the quality of governance, such as the degree of consultation, coherence, and institutional learning involved. By this standard, the reform fares poorly. Decision-making has been top-down, consultation selective, and interagency coordination has often been bypassed.

It reminds policymakers that responding to the tariff agenda requires considering, or even engaging with, all three fronts: political, programmatic, and procedural. 

Understanding these three dimensions helps decode the apparent contradictions of the tariff regime. It reveals how a policy can be politically salient yet analytically fragile, adequate in narrative terms, but deficient in design and execution. For international observers and engaged partners, especially within the EU, this framework also has a strategic value. It reminds policymakers that responding to the tariff agenda requires considering, or even engaging with, all three fronts: political, programmatic, and procedural. In other words, in a comprehensive counter-strategy, purely economic arguments will remain inadequate. Recognising that Trump’s trade policy functions as an ongoing political process rather than a fixed economic doctrine will thus allow European actors to perceive it more accurately and, therefore, craft adaptive responses and measures that are less vulnerable to sudden shifts in US strategy. In this sense, the framework is not only diagnostic but also prescriptive, providing the conceptual discipline needed to command policy strategy in an inherently volatile policy environment.

Table 2: Assessment of Trump Tariffs’ Success

Dimension Assessment of Trump’s Tariffs Process Success Weak: Top-down, opaque, lacking consultation and public engagement Programmatic Weak: unclear goals, rising costs, retaliation risks Political Moderate: energises base, builds new coalition, frames foreign competition as a national threat

Based on: Marsh & McConnell (2010): “Towards a framework for establishing policy success”[13]

Conclusion

Internationally, tariffs function more as a negotiating instrument than a coherent trade policy; domestically, they operate as a narrative device, reinforcing Trump’s political messaging about restoring manufacturing and protecting American jobs.

The US tariff reform has been designed and implemented in ways that reform theory suggests are unlikely to succeed. Setting aside the risks it poses to the global economy, its economic rationale is weak, its objectives unclear, and its execution inconsistent. Yet these very weaknesses illustrate how power, ideology, and uncertainty now interact in the making of American trade policy, creating a coalition driving a highly disputed reform. Internationally, tariffs function more as a negotiating instrument than a coherent trade policy; domestically, they operate as a narrative device, reinforcing Trump’s political messaging about restoring manufacturing and protecting American jobs, thereby regaining economic sovereignty.

 

Recent judicial developments should also be taken into consideration when assessing the reform holistically. Lower federal courts have already found core elements of the tariff scheme unconstitutional, and the pending Supreme Court review could convert legal contestation into a decisive political variable. Judicial pushback does more than test legality; it can alter tactical choices within the administration (appeals, selective implementation, and legal workarounds), recalibrate bargaining leverage abroad, and create deadlines and windows for negotiation that political actors must account for.

The result is a system that is at once personalised and unpredictable, a policy arena that privileges immediacy over institutional coherence.

The reform process reflects elements of both the aforementioned high-ambiguity and interactive models of policymaking. As in the high-ambiguity reform model, solutions precede problems, so tariffs emerge as pre-packaged answers to diffuse labelled grievances such as economic decline, deindustrialisation and trade deficits. The interactive elements lie in how these policies mutate through feedback loops of crisis, shifted coalitions and opposition, and negotiation. Rather than linear policy design, we see a process of continuous adaptation, in which actors improvise around presidential impulses and external reactions, insulated primarily from expert advice. The result is a system that is at once personalised and unpredictable, a policy arena that privileges immediacy over institutional coherence. Or, in other words, a chaotic and conflict-prone policy environment, where outcomes are contingent on political manoeuvring rather than strategic design.

Framing this process through the proposed multidimensional framework clarifies why this reform endures politically despite its fragility. Politically, it speaks to the core constituencies and re-anchors Trump’s electoral narrative, even as broader public approval erodes. Programmatically, it remains weak, producing short-term symbolic victories but slight measurable improvement in economic performance. Process-wise, it shows minimal coordination and consultation, driven more by loyalty networks than by bureaucratic or expert procedure. Taken together, these dimensions depict a reform that succeeds in communication inside the party’s electoral base but fails as national policy.

For Europe, this analysis carries immediate strategic implications. To adapt to this new transatlantic relationship and respond effectively to future additional trade negotiations, EU policymakers must treat US actions not as static measures to be countered, but as interactive processes to be handled carefully. Tariff levels, exemptions, and bilateral deals will likely continue to fluctuate because the system that generates them is inherently unstable. Negotiators and analysts should therefore build strategies premised on volatility, crafting flexible instruments to manage recurrent shifts, such as rapid-response mechanisms, conditional retaliation frameworks, and coordinated communication channels[14]. The objective is not to mirror US escalation, but rather to remain salient within it, to anticipate rather than react.

Figure 3: Handling Unstable US Trade Policy

 

Source: Author’s illustration, synthesising insights from policy analysis and reform theory.

 

By reading US trade politics through the frameworks presented here, negotiators can better distinguish performative conflict from substantive negotiation, thereby reducing the risk of overreacting to symbolic measures.

Moreover, understanding the dynamics behind the tariff regime helps disentangle intent from outcome. Recognising that Trump’s trade policy operates simultaneously as an electoral project, an ideological statement, and a negotiating tactic could enable Europeans to prioritise engagement where material interests align and to contain disputes where they do not. By reading US trade politics through the frameworks presented here, negotiators can better distinguish performative conflict from substantive negotiation, thereby reducing the risk of overreacting to symbolic measures.

Capturing this concept is essential. Codifying the reform’s nature as a policy process reveals that it is interactive, unpredictable, and highly non-linear – qualities that ensure volatility will persist even after temporary deals, such as the July compromise. This unpredictability could also explain why criticism of the EU’s response often misses the bigger picture: the very object of that response is unstable, fragmented, and subject to sudden shifts.

Understanding trade reform in this way provides a firmer foundation for assessing policy choices in this new global economic landscape. The US is no longer operating within a stable, rules-based framework. This makes traditional forecasting inadequate. Instead, analytical capacity must now focus on process-tracking, which involves monitoring better networks of influence, institutional signals, and domestic political incentives. Policymakers should expect reversals, disputes, and evolving coalitions to shape their trajectory. Only by situating Europe’s options within this broader context of how the US trade policy is formulated can public debate and strategic planning become more coherent. In short, understanding the how of Trump’s tariff policy is now as important as understanding the what. Ultimately, this perspective not only helps interpret the current turbulence but also anticipates future disruptions in the global trade order.

[1]J. Martinez-Vazquez, Successful tax reforms in the recent international experience: Lessons in political economy and the nuts and bolts of increasing country tax revenue effort, ICEPP Working Papers, Paper 214, 2021.

[2] J. Kingdon, Agendas, alternatives, and public policies, Boston: Little, Brown, 1984.

[3] J.D. Aberbach & T. Christensen, Why reforms so often disappoint, The American Review of Public Administration, 44(1), 2014, pp. 3–16.

[4] D. Rodrik, The positive economics of policy reform, The American Economic Review, 83(2), 1993, pp. 356–361.

[5] Ibid.

[6] J. Kingdon, Agendas, alternatives, and public policies, Boston: Little, Brown, 1984. See also J.W. Thomas & M.S. Grindle, After the decision: Implementing policy reforms in developing countries, World Development, 18(8), 1990, pp. 1163–1181.

[7] K. Orach, M. Schlüter & H. Österblom, Tracing a pathway to success: How competing interest groups influenced the 2013 EU Common Fisheries Policy reform, Environmental Science & Policy, 76, 2017, pp. 90–102.

[8] L. Haelg, S. Sewerin & T.S. Schmidt, The role of actors in the policy design process: Introducing design coalitions to explain policy output, Policy Sciences, 53(2), 2020, pp. 309–347.

[9] M. Schudson, The trouble with experts – and why democracies need them, Theory and Society, 35, 2006, pp. 491–506.

[10] A. Michels & L. De Graaf, Examining citizen participation: Local participatory policy making and democracy, Local Government Studies, 36(4), 2010, pp. 477–491.

[11] F. Fischer, Citizen participation and the democratization of policy expertise: From theoretical inquiry to practical cases, Policy Sciences, 26(3), 1993, pp. 165–187.

[12] D. Marsh & A. McConnell, Towards a framework for establishing policy success, Public Administration, 88(2), 2010, pp. 564–583.

[13] D. Marsh & A. McConnell, Towards a framework for establishing policy success, Public Administration, 88(2), 2010, pp. 564–583.

[14] A more comprehensive strategy for the EU was initially proposed by T. Gehrke, in “Brussels hold’em: European cards against Trumpian coercion”, ECFR/576, 2025. Available at: https://ecfr.eu/wp-content/uploads/2025/03/Brussels-holdem-European-cards-against-Trumpian-coercion.pdf

Following the conclusion of the World Economic Forum in Davos, ELIAMEP’s experts share their views on the strategic trends highlighted in global geopolitics and assess their implications for transatlantic cooperation.

The analysis is available in Greek.

Since 2004, the European Union (EU) and India have fostered a strategic partnership, with Summits held over the years to strengthen their relations. Despite periodic inconsistencies and obstacles that have hindered the partnership’s growth, their collaboration appears to have gained renewed momentum in 2025. Attention has been growing for the upcoming 2026 Summit, which has the potential to serve as a crucial opportunity to deepen their ties. This policy brief reviews their bilateral interactions, addresses current challenges in the EU-India relations, and explores expectations for the upcoming Summit. It also underscores Greece’s role in identifying new opportunities to deepen EU-India cooperation and suggests measures to further enhance their strategic partnership.

Read here in pdf the Policy paper by George Dikaios, Marie Curie Fellow, Leiden University; Senior Research Fellow, ELIAMEP and Marianna Terezaki, Junior Research Fellow, ELIAMEP.

Greenland is emerging as a critical point in global geopolitics, raising urgent questions: Are European countries ready to navigate a potential crisis in Euro-Atlantic relations?

ELIAMEP experts explore the strategic challenges and opportunities this situation presents.

The analysis is available only in Greek.

In early 2025, the new US administration announced a series of tariff increases in violation of its commitments in the World Trade Organization (WTO), undermining the very system of trade rules that the US had helped establish after World War II. The US actions led to many retaliatory responses of increased tariffs by trading partners including the European Union (EU). Over the next several months, the US engaged in a series of negotiations leading to so called ‘framework’ agreements with the EU and others.

This paper explores first, the short term implications of these chaotic changes in the world trading regime on the economies of the EU and Greece. Second, it considers how the world trading system will evolve in the medium to longer term and its policy implications for the EU and Greece. The paper concludes that the recent turmoil in international trade should be addressed through the implementation of a basic set of policies to strengthen European integration and institutions as articulated by recent major studies commissioned by the EU, as well as, through trade agreements between the EU and like-minded countries.  These policies should help the European Union rise to the challenges created by the current turmoil and lead to a future strengthening of the WTO.

Read here the policy paper by Constantine Michalopoulos, ELIAMEP Senior Policy Advisor; former senior official World Bank and USAID; Adjunct Professor, American University, School of Advanced International Studies, Johns Hopkins University.

Introduction 

In early 2025, the Greek economy had mostly recovered from the disastrous calamities of a decade earlier and the pandemic’s aftermath. Although income levels had not regained pre debt crisis levels, the economy had been growing steadily for three years. However, continued structural deficiencies, an aging population, as well as technology and climate change, all presented serious challenges to long term economic prospects; and there were two raging wars in the near vicinity. [1]As if these challenges were not enough, the new US administration announced a series of tariff increases in violation of its commitments in the World Trade Organization (WTO), undermining the very system of trade rules that the US had helped establish after World War II.

In the US, the administration’s actions prompted numerous challenges to their constitutionality.[2] Internationally, they led to many retaliatory actions by trading partners including the European Union (EU), China and others. Over the next several months, the US backed off a number of the very large early tariff increases and engaged in a series of negotiations leading to so called ‘framework’ agreements with many countries, including the EU. But throughout 2025, the US continued to introduce arbitrary tariff changes, all in violation of the fundamental Most Favored Nation (MFN) non-discrimination principle, enshrined in the WTO, thereby raising significantly the degree of uncertainty in trading transactions.

The purpose of this paper is twofold: first, to explore the short-term implications of these chaotic changes in the world trading regime on the Greek economy; and second, to consider how the world trading system will evolve in the medium to longer term and its implications for the EU and Greece. The analysis, by its very nature, will be tentative, as the policy changes are relatively recent and have not had the time to make a serious impact on trade transactions. Besides, the main new element introduced by the US actions is increased policy uncertainty.

The EU- US Agreement 

The US administration introduced peremptorily and unilaterally a number of tariff changes in early 2025 without offering an authority or justification for them. For example, President Trump announced plans on February 26, 2025, to impose tariffs of 25 percent on imports from the European Union. The major executive action that prompted reaction from the EU occurred on April 2, when the US announced a set of so called “reciprocal” tariffs affecting more than 60 countries, some as high as 50% depending on the countries’ trade balance with the US. According to these, International Economic Emergency Powers Act (IEEPA) tariffs, the US reciprocal rate on imports from the EU would have been set at 20 percent. On May 23, President Trump announced he would be imposing a 50 percent reciprocal tariff on the EU beginning June 1. On May 25, he announced these tariffs would take effect July 9 instead. On July 12, President Trump announced the reciprocal tariffs for the EU would be set at 30 percent by August 1 [4].

In the meantime, the EU retaliated by lifting the suspension of previous tariffs, with rates of up to 50 percent, affecting $8 billion of US exports scheduled for April 1, 2025 and increased tariffs to an additional $20 billion of US exports scheduled for April 13. Finally, on July 15, the EU released a list of $84 billion worth of US goods that would face retaliatory tariffs, if no deal was reached by August 1 [5].

On August 4, 2025, the US and the EU reached a framework agreement on tariffs and other economic issues which governs the tariff rates affecting trade between them to date.

On August 4, 2025, the US and the EU reached a framework agreement on tariffs and other economic issues which governs the tariff rates affecting trade between them to date.

According to the main trade related commitments of the agreement, the US will:

• Apply a maximum, all-inclusive 15% tariff ceiling for EU products, including cars and car parts, pharmaceuticals, and semiconductors [6] and [7].
• Apply only MFN tariffs, (which are effectively zero or close to zero) to the following EU products: unavailable natural resources (including cork), all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors.
• Impose tariffs of 50% to aluminum and steel products justified by the US under a different exemption, on grounds on national security (US Section 232, of the 1962 Trade Expansion Act).

The EU agreed to:

• Eliminate completely tariffs on a large number of industrial products imported from the US—with an estimated value of €5 billion [8].
• Improve significantly market access to US exports through tariff reductions for certain seafood, nuts, dairy products, fresh and processed fruits and vegetables, processed foods, grains and planting seeds, soybean oilseeds, pork and bison meat and lobster  all implemented via product-specific Tariff Rate Quotas (TRQs).

In addition, the two sides agreed to work together to eliminate non-tariff and technical barriers to trade, accept and provide mutual recognition of each other’s standards in automobiles as well co-operate on a number of other important issues affecting trade with China—for example, regarding the latter’s imposition of export controls on rare earths. Finally, the agreement contains a number of EU commitments to ease procedural requirements which the US feels restrain its exports as well as to purchase $40 billion worth of AI chips [9].

There was widespread criticism that the deal was too one-sided favoring the US. But there were also voices suggesting that this was the best the EU could do under the circumstances and that, in any case, there was no logical response to the US requests.

There was widespread criticism that the deal was too one-sided favoring the US. But there were also voices suggesting that this was the best the EU could do under the circumstances and that, in any case, there was no logical response to the US requests [10].

The US actions regarding tariffs were expected to be implemented in some cases as of September 1, 2025 and in others as soon as the EU Commission submitted the needed legislative proposals, which it did in September, 2025. The EU Council took the necessary steps to implement the agreement, including through the establishment of tariff quotas for US products [11].  It is expected that the EU Parliament will complete approval of the relevant legislation by February 2026. At this point it is unclear whether the Parliament will introduce changes in the agreement or what will happen, if such changes are introduced.

Economic Impact on the EU- short term

In the course of 2025 various studies concluded that the US tariffs would result in significant GDP losses both to the US and to the global economy, as well as increased inflationary pressures in the short term. As the year progressed, the estimates of the damage the tariff actions would cause were reduced for several reasons: exporters absorbed some of the increased tariff costs; many importers anticipating the tariffs, had stocked up during the year and the original tariff increases were subsequently reduced.

In the course of 2025 various studies concluded that the US tariffs would result in significant GDP losses both to the US [12] and to the global economy, as well as increased inflationary pressures in the short term [13]. As the year progressed, the estimates of the damage the tariff actions would cause were reduced for several reasons: exporters absorbed some of the increased tariff costs; many importers anticipating the tariffs, had stocked up during the year and the original tariff increases were subsequently reduced [14].

The economic impact of the EU-US trade agreement on individual EU countries will depend on several factors: (a) the amount and composition of each country’s exports to the US; (b) the amount and composition of its imports from the US whose tariffs will be reduced; (c) the specifics of the pass-through in each traded good; (d) any exchange rate changes following the imposition of the tariffs; and (e)  the indirect effects on each country’s future trade of changes in income resulting from the EU-US agreement.

Early studies on the issue [15], suggested that the US tariffs will result in a decline of approximately 0.2-0.3% of EU GDP in 2025. A more recent study [16] confirmed the 0.3 % GDP decline on average and suggested that different countries will have different results depending on the importance of the US in their export market and the composition of their exports. Using a model that took into account the longer term second order effects adversely affecting EU exports as a result of declines in EU and other countries incomes as a consequence of the tariffs, the study suggested a decline of 0.5% on average for 2026. Similar views were expressed by European business in a survey in November 2025 [17]. The most recent IMF World Economic Outlook [14] includes two risk scenarios for 2026: in the worst case, GDP of the euro area would decline by about 1%t below its original baseline in 2026; in the best case, output of the euro area could increase by around 0.7–0.8 percentage points above baseline despite the tariffs. But no studies appear to have included the longer term positive but likely small effects of EU incomes rising as a result of the future reduction of tariff barriers against US imports.

In the first 8 months of 2025, US exports to the EU increased by about 10% and imports, slightly less—around 9.5%. This resulted in an increase in the US trade deficit with the EU in the first eight months of the year from $151.9 billion in 2024 to $165.8 billion in 2025. The results are skewed however, because of very large anticipatory US imports in early 2025. In the months June- August 2025, US imports from the EU declined relative to 2024 [18].

Economic Impact on Greece-short term

Early commentary on the impact of the EU-US agreement on Greece suggested a much higher decline in Greece’s exports and GNP in 2026 than that presented in the above studies. Kathimerini [19] predicted a GDP decline of 0.5%-1.0% in 2025, and smaller effects ranging from 0.2% to 0.4% in 2026 and even smaller declines in 2027.

…the effect of the US tariff increases and the subsequent US-EU trade agreement will result in significantly lower adverse effects on Greek GDP. The main reason for this is that Greece depends much less on the US market for its exports than the EU average.

It is unclear on what analysis these projections were based and no model estimates based on an econometric model of Greece appear to exist. Nevertheless, given the projections for EU as a whole and the size and composition of Greek exports, the analysis below will argue that the effect of the US tariff increases and the subsequent US-EU trade agreement will result in significantly lower adverse effects on Greek GDP. The main reason for this is that Greece depends much less on the US market for its exports than the EU average. Table 1 below shows the evolution of Greek trade with the EU, the US and the rest of the world (ROW) over the 2018-2024, period, i.e. after the Greek economy stabilized from the debt crisis.

Table 1 shows that Greek exports to the US account pretty steadily for about 4% of total Greek exports and about 10% of Greek exports outside the EU. This compares to an average of EU exports to the US of 21% of EU exports to the rest of the world [16]. Roughly speaking, Greece is about half as much exposed to the US market for its exports relative to the average EU member, and much less than countries like Germany or Ireland. The story is similar for Greek imports. Greece has run a small surplus in its trade balance with the US in the last two years while running a persistent huge trade deficit overall. Greece offsets its traditional large trade deficits by running a large surplus in services, especially through earnings from shipping and tourism [21].

The composition of Greek exports to the US does not suggest that Greece would be hit harder than the average EU member by the increased US tariffs. While no detailed estimates are available, the main problem appears to derive from Greece exports of aluminum and steel products which are subject to 50% tariffs (see below Table 2). It should be noted however, that the US tariffs on aluminum (and steel) had been earlier imposed by the US on the grounds of security (Sec. 232) and separately from the IEEPA tariffs that ultimately led to the US- EU agreement.

 

Table 2 shows two dimensions of the importance of aluminum and steel on the Greek economy: first, they are small relative to Greek exports to the US, 7.0% and 2.1% respectively; and second, that the proportion of Greece’s exports of aluminum and steel products to the US are quite small relative to the total Greek exports of these products, 5.1% and 6.5% respectively. The latter would imply that Greek exporters could shift sales of these products elsewhere.[3]

Of the products in which the US is an important market accounting for more than 10%  of total exports, only the agricultural products in the categories of Vegetables and Fruits (20.9%), Essential oils (10.5%) and Edible fruits (16.2%) are likely to be affected by the new US tariffs. And the US has committed that these will not exceed 15%. Greece is not an oil producer and the large exports of oil products  to the US as well as the rest of the world are determined primarily by decisions of the oil companies, some US owned, which import crude oil from the Middle East refine it in Greece and ship out oil products all over the world.  The US importance of the category ‘Aircraft, spacecraft’ probably reflects transactions of air carriers and repairs of aircraft engines and parts as Greece does not produce either aircraft or spacecraft. Greece does produce a variety of crude materials, salt earth etc., for which the US market is significant (21.6%), but as noted earlier, the US will maintain minimal tariffs on these products.

 

Estimates of US trade with Greece for the first eight months of 2025 showed the US to have decreased both its export and its imports to and from Greece- in the case of exports by 10% in the case of imports—i.e. exports from Greece by 3.3% [19].  These data suggest that the pattern of Greece’s trade with the US is somewhat different than that noted earlier for the EU as a whole. It remains to be seen how this pattern will be affected in the longer term by the emerging changes in the world trading system.

Recent reports confirmed the mixed impact of the US tariffs on Greek exports to the US.  Tariffs on edible fruits have been recently removed, but exports of dairy products have been adversely affected. Despite high tariffs, “iron/steel pipes, rose from a zero base in 2023, to €21.8 million in 2024 and to €49.2 million in the April-September 2025 period. Electrical conduits reached €38.4 million in 2024 but during the tariff period they experienced a decrease of 88.1%” [22]. 

On balance, given the relatively small importance of the US market to Greece, compared to other EU countries, it is fair to conclude that the impact of the US-EU agreement on Greek GDP will be significantly smaller than for the EU as a whole. We would guess that the impact could be in the neighborhood of 0.1% to 0.15% reduction of GDP relative to baseline forecasts for 2025 and 2026, much smaller than earlier estimates.

On balance, given the relatively small importance of the US market to Greece, compared to other EU countries, it is fair to conclude that the impact of the US-EU agreement on Greek GDP will be significantly smaller than for the EU as a whole. We would guess that the impact could be in the neighborhood of 0.1% to 0.15% reduction of GDP relative to baseline forecasts for 2025 and 2026, much smaller than earlier estimates. That size of an effect could easily be overwhelmed by other developments in Greece or in the global economy.

The World Trade System

…the US actions on tariffs violated its commitments to the core principle of the WTO of not unilaterally increasing duties that have been capped in previous agreements with its partners (Article II of the GATT) . Similarly, the bilateral deals, such as those with the UK as well as the EU, China, and other countries violate US commitments to the most-favored nation (MFN) non-discrimination clause (Article I of the GATT).

Throughout 2025, the US actions on tariffs violated its commitments to the core principle of the WTO of not unilaterally increasing duties that have been capped in previous agreements with its partners (Article II of the GATT)[4]. Similarly, the bilateral deals, such as those with the UK as well as the EU, China, and other countries violate US commitments to the most-favored nation (MFN) non-discrimination clause (Article I of the GATT). Such preferential deals are permitted only if they are part of an established Free Trade Area or Customs Union. These deals also defy the WTO approach of promoting trade through multilateral negotiations [23] and [24].

For a while, it appeared that the US may wish to leave the WTO. It had withdrawn from other multilateral institutions such as UNESCO and WHO and it had not paid its WTO dues for two years. There were even some voices suggesting that the trading system as a whole would be better off if the US did leave the WTO [25]; or for that matter that it could be expelled [26]. But the US did pay its dues, and others have argued that the US should stay in the WTO as it could provide a useful counterbalance to China which has also been guilty of significant WTO violations.

It is also fair to argue that, in the last twenty years, the WTO based trade system has been undermined by an erosion of global commitments to multilateral rules by many countries including the EU.

It is also fair to argue that, in the last twenty years, the WTO based trade system has been undermined by an erosion of global commitments to multilateral rules by many countries including the EU. It started first, with the failure of completion of the Doha Round of negotiations, which were abandoned after more than a decade of trying—for which, countries like India and China, were as responsible as the EU and the US.  Later, economic and political and developments resulted in reduced emphasis on multilateral approaches to improve firms’ participation in international trade:

• Attempts to facilitate small and medium enterprises foreign trade participation led to “mini-deals” that may be beneficial for a subset of firms in certain sectors but undermine global standards. “The EU has concluded over 2,000 such mini-deals, which cumulatively cover a large share of EU trade participation in global supply chains” [27].
• Countries, and the EU in particular, have established regulatory standards based on concerns about the environment, health and safety, cross border data flows, cyber-security, consumer or worker protection. The national agencies tasked with implementing regulations generally have not wanted, even if they are permitted — to adjust regulatory norms simply to facilitate trade [28].
• The Covid-19 pandemic resulted in a sudden and large contraction in global trade, revealing deep vulnerabilities in international supply chains. This led many countries to introduce policies that promote strategic autonomy, meaning steps that would the ensure availability of critical goods without dependence on foreign suppliers. Governments adopted export restrictions, stockpiling, and incentives for domestic production or near-shoring [27].
• A direct consequence of the strategic autonomy logic was a renewed interest and justification of a wide range of industrial policy measures. Industrial policy became more fashionable and acceptable [29].

Despite, or one would argue, in parallel with these developments, the WTO continued to function. A fisheries agreement came in to force in mid-summer and the EU finalized a WTO compatible agreement with Mercosur that had been under negotiation for more than a decade. And as WTO Director Ngozi Okonjo-Iweala noted in a September 17, 2025 speech, following the US measures there was an 8% decline of trade conducted under MFN rules, but MFN rules continued to apply to 72% of world trade.

In light of these developments, what can be said about the future of rules that would govern world trade? As of November 1, the US average effective tariff rate was 13.1% compared to 2.5% in 2024 [31]. Clearly the most important new element is the introduction of additional uncertainty, for better or worse. On November 14, 2025, the US administration, facing increasingly unfavorable reaction by the US public to the imposition of tariffs on consumer goods, eliminated the   IEEPA tariffs on a whole lot of food and agriculture products. And the constitutionality of all of the IEEPA tariffs is uncertain with the US Supreme Court expected to rule on the issue in the spring of 2026.

Still, given the apparent attraction of tariffs as a foreign policy instrument to President Trump, it is expected that in the event the US Supreme Court rules that the IEEPA tariffs are unconstitutional, the US Administration will seek to justify tariffs under different legislative provisions, such as under section 301 or 202 of the US code or under section 122 of the Trade Act of 1974 which gives the President the authority to impose a temporary tariff of up to 15 percent for up to 150 days to address “large and serious United States balance-of-payments deficits”. All these measures are likely to be challenged in US courts, resulting in litigation that could easily last another 1-2 years.

This means essentially, that global uncertainty on the rules of international trade is likely to continue at least until the end of the current US administration in 2028.

This means essentially, that global uncertainty on the rules of international trade is likely to continue at least until the end of the current US administration in 2028. A look into the Trade Policy Uncertainty (TPU) Index is quite telling in this respect: it shot up in early 2025, came down for a while and shot up again [32]. Other things equal, this factor alone is going to affect adversely the volume of future world trade.

Medium Term Scenarios

The uncertainties surrounding the future of the world trade system have led to the elaboration of many alternative scenarios. In considering these scenarios, one should keep in mind that trade negotiations take a long time to conclude as they involve detailed analysis of data, something that the ‘framework’ agreements concluded by the US did not do. Nevertheless, all scenarios about the future of word trade in the medium term—until 2028, are bleak.

The scenarios discussed below do not include what might happen, if there is a major political or military conflict involving the three major protagonists in world trade, the US, the EU and China. Also, for reasons discussed above, the scenarios do not include a ‘Retreat’ scenario in which the US administration, faced with a recession and declining public support, reverses course and abandons its WTO inconsistent tariff policy.

Scenario 1- Malaise

Under this scenario, WTO members would tolerate higher tariffs and US-dictated deals for as long as they last, while continuing to go about their other WTO business as usual. “The relevance of the WTO will continue to be eroded, though its stabilizing influence may not disappear entirely”[5]. But this scenario contains a lot of complex issues for WTO members. For example, Brazil may file a complaint in the WTO that the US-EU agreement that gives preferential treatment to US exports to the EU damages Brazil’s interests. In this case the EU may not wish to jeopardize its agreement with the US or face counter-measures, in which case it may need to appeal through the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) members [33].

It is unclear how long WTO members would be willing to accept this situation. Perhaps they will wait until the end of the current US administration- while in the meantime they pursue other options. In the case of the EU, it is clear that it would be desirable to explore links with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). A free trade agreement between the EU and CPTPP will account for 30% of world trade. Krueger has argued that the two groups should combine to establish a new organization, the GTO without the US [25].

Scenario 2 –Fragmentation

Under this scenario fragmentation accelerates. The MFN principle and multilateralism are further weakened and give way to a new logic: every country or exporting firm cuts the best deal for itself.[6]

The scenario has many regional variants. If the WTO continues to produce nothing and the EU combines with CPTPP and others to produce a modern agreement, is it necessary to anchor it in the WTO ?

A lot will depend on what role China will want to play. Under one variant, China could take the lead in organizing a large group of countries, for example through an expanded BRICS, to set up their own system. But many countries are worried about unfair Chinese policies that support Chinese firms as it promotes its manufacturing exports because of over capacity at home; and/ or countries may be concerned about China’s willingness to employ trade as a coercive instrument for foreign policy purposes.

Still, such an initiative by China could force Europe to work with Japan, South Korea, and Australia to create their own group and the US with some Latin American and Caribbean to establish yet another. Africa would strengthen its regional trade institutions and possibly ally itself with the BRICS. In all these variants, the WTO is not closed down, but becomes increasingly irrelevant. On the other hand, China has recently indicated that it is willing to abandon its WTO treatment as a ‘developing country’ suggesting a willingness to work within the WTO and thereby dropping a source of a lot of disputes.

The Future of EU Trade Policy

In these uncertain times, it would be natural for the EU to take the lead in strengthening the global multilateral trade system, to the benefit of its members, including Greece but also to the benefit of global trade and the reduction of global poverty.

Co-operation in trade was the essence of what started European integration through the Treaty of Rome more than 70 years ago. In these uncertain times, it would be natural for the EU to take the lead in strengthening the global multilateral trade system, to the benefit of its members, including Greece but also to the benefit of global trade and the reduction of global poverty.

EU should start working hard to strengthen its links with CPTPP. Combined with the EU- Mercosur agreement, this would make a formidable group of countries which could become the basis of attracting other members from Africa and Latin America.

The EU Commission views at this point is that an EU-CPTPP link is a complement and not a substitute to the WTO [34].[7]. In my view, EU should start working hard to strengthen its links with CPTPP. Combined with the EU- Mercosur agreement, this would make a formidable group of countries which could become the basis of attracting other members from Africa and Latin America. It could then work with China and possibly the US to strengthen the multilateral trade system and the WTO.

Such an effort should have two dimensions: first, work with others to establish needed reforms to the WTO; second, adopt internal EU policies that use trade to support equitable and sustainable economic growth for its people.

Regarding WTO reform Mavroidis [24] suggests that it may be useful for the international community to attempt a last-ditch negotiation to bring the US back to the multilateral house, and they should be prepared to amend the WTO’s rules in order to lure the US back to the spirit of the multilateral agenda that would benefit the institution at large. This initial agenda should take care of the US’s concerns such as the introduction of more flexibility in the current Safeguards Agreement or to deal with oversupply in particular sectors as well as amending the Compulsory Third-Party Adjudication (CTPA).

This is certainly worthwhile. The question is at what point it should be done. The current administration has in mind a totally different non- multilateral approach to international trade, feels that the “ancient régime” is obsolete, and should be substituted with a new supposedly more fair and balanced scheme. In any case, putting together an EU- CPTPP understanding will take time, after which a different US administration may be in place which may be more agreeable to global trade agreements. 

There is a need to revise the basis of participation in the WTO by different groups of countries.

It is clear that WTO reforms are needed in several areas in addition to the ones noted above that bother the US. These include the following five areas:

• There is a need to revise the basis of participation in the WTO by different groups of countries. The existing provisions regarding special and differential treatment that permit a group of countries to participate on the basis of more limited commitments to general rules for being ‘developing’ based on ‘self-selection’ proved unworkable during the Doha Round[8]. Yet, there is a need to reduce differences in national regulatory regimes that impact international trade through the mutual adoption of agreed good regulatory practices to which not every WTO member can or may be willing to adhere. Such efforts can be pursued among like-minded states — that is, on a plurilateral and variable-geometry basis. Open Plurilateral Agreements (OPAs) — agreements between groups of countries on specific policies that significantly affect international trade costs and that are open to participation to any country willing to implement a set of agreed rules and disciplines can make a major contribution to facilitating trade. Such agreements can be pursued in several areas such as Digital Trade, Climate and Environment [28], as well as subsidies (see below).[9]

• The WTO subsidies agreement should be revised in order to address several issues: first, is the issue of how to deal with subsidies that provide public goods—including those that address environmental issues. A subsidy that reduces world market prices for products like solar panels or wind turbines has positive consequences for the energy transition, but negative economic repercussions for local producers. Revisiting current WTO rules that center on the adverse effects of foreign subsidies on national firms to recognize that some types of subsidies may be appropriate and desirable to address market failures, in the process benefiting foreign countries, is an important subject for plurilateral negotiations. Still other issues arise from the complexities involving subsidies of trade in global value chains, as well as the desire to pursue ‘industrial’ policies.

• The definition of ‘economic security’ needs to be clarified as the relevant WTO provisions are too vague.

• There is a need to make meaningful progress of liberalizing trade in services. Everybody is infatuated with the desire to protect and restore production of goods, in particular manufacturing, forgetting that services will inexorably rise as a share of incomes and output.

• The link between trade policy and environmental action needs to be clarified especially as the EU is starting to implement its Carbon Border Adjustment Mechanism (CBAM) in January 1, 2026. As noted above, this is an area where an OPA can be especially useful as it is quite clear and it is internationally agreed that poorer countries are not in a position to make the same kind of commitments as more developed economies. A specific proposal for an OPA of such a ‘club’ is contained in [37].

This is a tall order of reforms that need to be undertaken. They will take time to negotiate in part because the political economy of negotiating trade issues resulting from regulatory regimes is more difficult than negotiating a mutual reduction of quotas or tariffs where the costs to some domestic producers can be offset by gains of exporters.  Also, the Doha failure suggests that countries are not likely to want to try to have a ‘Round’ where nothing is agreed until everything is agreed by every participant. A more modest approach using OPAs may be a better avenue for future reform.

These efforts must be accompanied by EU policies that use trade to support a sustainable and equitable growth of incomes. In this connection, measures that raise productivity of EU producers are critical.

These efforts must be accompanied by EU policies that use trade to support a sustainable and equitable growth of incomes. In this connection, measures that raise productivity of EU producers are critical. Since 2019 labor productivity in the EU grew by 2% compared to 10 % in the US [38]. According to a recent study, the main difference between US and EU in labor productivity growth is that EU productivity rose much less than that of the US in the services sector since 2000 [39].

The Draghi study commissioned by the EU in 2024 contains a large number of recommendations on how to raise productivity, some of which are only now slowly being implemented [40]. In particular, there is concern that the EU is lagging far behind the US and China in the application of AI which is critical to future productivity growth. According to Draghi’s report, the General Data Protection Regulation (GDPR), introduced by the EU to protect citizen’s privacy in 2018, is a drag on Europe’s competitiveness. “Europe must move beyond fragmented and overly rigid regulatory structures if it wants to remain competitive in a fast-changing digital landscape. Evidence already shows that GDPR data transfer rules have constrained export potential, and additional regulatory layers introduced through the AI Act risk amplifying these pressures”[41].

Measures to promote diversification of imports of oil and natural gas, by accelerating the green energy transformation are of obvious importance to future trade policy as well as steps to diversify supply of critical minerals away from China. These efforts, however, should not lead to generalized promotion of import substitution through protection incompatible with WTO provisions or commitments with regional trade partners.

“A ‘manufacturing-first’ attitude has taken hold in the European economic policy discussion. New strategies and industrial policies are designed with the ambition of boosting development and output in traditional industrial sectors” [42].[10] There is a clear danger, that disturbances in international trade will encourage the establishment of inefficient EU production —reshoring or home-shoring justified on the vagaries of ensuring adequate supplies of ‘critical’ products from global supply chains—while the future lies in services where growth has been and likely will continue to be greater than in manufacturing; and where the EU is the largest exporter in the world.

Implications for Greek Policy

For Greece, foreign trade policy is determined at the EU level.

For Greece, foreign trade policy is determined at the EU level. This should be helpful in protecting its interests through the large weight that Brussels would bring to bear in any negotiations with China or the US. [11] There are also serious limits to what individual countries can do to promote exports. As Greece has a very small share of exports relative to its GDP, there is a temptation to suggest that export promotion agencies can correct this problem [43]. They obviously can be of some help, but they are not likely to be determinant of overall performance, and in a country like Greece, where there is a tendency of cronyism, there are dangers of trying to pick winners by supporting friends. The best way to promote exports is through general policies that increase productivity and reduce bureaucratic hassles [44].

In this connection, the recommendations of the Draghi report are especially relevant. In many respects, the report sounds as if it was talking specifically about problems facing Greek industry and more generally the Greek economy. The importance of productivity growth to export performance has been well established. In this connection, I argued long ago that the export performance of the ‘Asian Targets’ in the 1960’s was critically dependent on the growth of total factor productivity [45].

Among the Draghi’s report many recommendations are proposals to raise productivity through more training as well as improved technology through increased expenditures on research and development. Implementing these proposals in Greece would require significant increases in both public and private investment from the current levels of roughly 15% of GDP.

Among the Draghi’s report many recommendations are proposals to raise productivity through more training as well as improved technology through increased expenditures on research and development. Implementing these proposals in Greece would require significant increases in both public and private investment from the current levels of roughly 15% of GDP. EU support can be helpful to Greece in this area, but it cannot substitute for stronger and better implemented public sector investments.

Conclusion

In sum, the recent turmoil in international trade should not result in a deviation from the basic set of policies that Greek governments need to pursue in collaboration with their European counterparts to strengthen European integration and institutions. They should do so based on the policy recommendations contained in the several studies referred to above. As it has done in the past, Europe can rise to the challenges created by the current turmoil and restore faith in the prospects of a sustainable and equitable future for its people. This will not happen through retrenchment and protection but through openness to trade. The EU is in the best position to lead a future restoration of a trade system governed by multilateral rules and agreements and a strengthened WTO.

[1]For a discussion see [1] and [2].

[2] Lower US courts judged the IEEPA tariffs to be unconstitutional, but the US Supreme Court permitted them to be retained until it passed a final judgement on them expected in early 2026 [3].

[3] There may be limit to such a shift, as both products, especially aluminum, appear to be in global over supply.

[4] GATT-General Agreement on Tariffs and Trade- incorporated in the treaty establishing the WTO.

[5] This scenario is basically the same as what Cernat [30] called ‘Sclerosis”.

[6] This is similar to Cernat’s’[30] third scenario ‘contagion’.

[7] Experience with international organizations over the last century suggests that they are almost as difficult to shut down—even after their usefulness is questionable [35] as to create new ones

[8] For a detailed discussion of the absurdities in the current system see [37]. For example, Turkey and Israel just like China were considered ‘developing countries’ just because they said so.

[9] Such agreements can also be pursued outside the WTO and at some point brought into the system.

[10] As well as in the United States.

[11] But EU membership may not provide cover in the wider US-China conflict: The recently appointed US Ambassador to Greece expressed her concerns to Prime Minister Mitsotakis about the 67% ownership of the Port of Piraeus by the Chinese firm Cosco and suggested that Greece may wish to force a sale of it in the future. To which the Prime Minister responded that agreements have to be respected [46].

 

 

The policy brief by Dr. Ioannis Armakolas (Head, South-East Europe Programme – ELIAMEP & Director, think nea – New Narratives of EU Integration) and Ioannis Alexandris (Research Fellow, South-East Europe Programme – ELIAMEP & Researcher, think nea – New Narratives of EU Integration), “Enlargement and the EU Budget: Is the price to pay high? The case against fiscal alarmism”, was prepared in the framework ELIAMEP’s initiative think nea – New Narratives of EU Integration, supported by the Open Society Foundations – Western Balkans. 

At a time when EU enlargement is increasingly contested by Eurosceptic and radical-right forces, the policy brief examines one of the most politically sensitive aspects of the debate: the budgetary and fiscal implications of enlargement. Building on think nea’s thematic report on radical-right narratives, the authors analyse how fears about costs to taxpayers, agricultural subsidies, and cohesion funds are mobilised to undermine public support for further EU expansion, particularly in net-contributor Member States.

Drawing on recent EU budget proposals for the 2028–2034 Multiannual Financial Framework, as well as economic modelling and lessons from previous enlargements, the brief demonstrates that the actual fiscal cost of enlargement is modest and manageable, especially when phased-in mechanisms and structural reforms are applied. At the same time, it shows that EU transfers are transformational for candidate countries, particularly in the Western Balkans, Moldova and Ukraine, supporting convergence, institutional reform and infrastructure development.

The analysis also highlights the opportunity costs of non-enlargement, emphasising how past rounds of enlargement generated significant economic gains for existing Member States through trade, investment, labour mobility and integrated supply chains. In this light, the brief reframes enlargement not as a fiscal burden but as a strategic investment in Europe’s competitiveness, resilience and long-term stability.

The paper concludes with concrete policy recommendations on how to reframe public debate, embed enlargement within the EU’s new competitiveness and strategic autonomy agenda, and counter fiscal alarmism by presenting enlargement as a win-win process that benefits both current and future Member States.

You can read the policy brief here.

The South-East Europe Programme of ELIAMEP is a member of the IGNITA network, led by Open Society Foundations – Western Balkans.

Alessandro Ieranò, Project Research Assistant at the South-East Europe Programme (ELIAMEP), explores the interplay between EU enlargement disputes and minority rights in his new article for Contemporary Southeast Europe.

Drawing from the Beleri case and Hungary’s ongoing veto on Ukraine, he observes how, in the context of bilateral disputes between a member (kin) state and a candidate (home) state, enlargement paralysis is a ‘lose-lose’ outcome for all parties involved. Above all, for national minorities, which risk to find themselves caught in the crossfire of politicisation and securitisation.

As he argues, this stems from the of lack of safeguards and alternative-dispute resolution mechanisms in the current enlargement framework, which has turned veto powers from an atomic option into a default practice. This not only enables the politicisation of kin-minorities in candidate countries—adding further straining bilateral relations—but also jeopardises enlargement at the moment when it is most needed. To address this challenge, he proposes a set of policy recommendations aiming at restoring the credibility of the enlargement promise through mutual guarantees to both ‘gatekeeping’ kin-member states and ‘obstructed’ candidate-home states, while preventing the securitisation of national minorities.

You may read the essay here.

Now in its sixth year, ELIAMEP’s annual forecasts return with the Special Edition ““ELIAMEP Outlook – Predictions for 2026” offering expert insights into the year ahead. Twenty-four analysts and collaborators of ELIAMEP examine the key challenges, emerging trends, risks, and opportunities expected to shape Greece, Europe, the Mediterranean, and the wider world in the coming year. This year’s edition is further enriched by five contributions from voices of the “next generation,” bringing fresh perspectives and new ideas into the conversation. A selection of essays was featured in a special supplement of TA NEA on January 3. Read the paper here.