Countries in the Global South increasingly view President Trump’s “America First” foreign economic policies as both a coercive force and a catalyst for greater economic autonomy. For more than half a century, economic development in Latin America, Africa, and parts of Asia has been constrained by austerity conditions imposed by the International Monetary Fund and the World Bank, by punitive debt collection policies pursued by commercial banks and hedge funds backed by U.S. law, and by trade deals that stunt their ability to develop economically. In that respect, Trump’s tariffs are only an intensification of terms of engagement that do severe damage to developing nations.
The prospect of greater South-South collaboration is one of the few bright spots in a generally bleak global picture. South-South trade has been expanding rapidly and thus offers important leverage and opportunities. If we include trade with China, the major engine of such trade, South-South trade represents 55.6 percent of world trade versus 38.3 percent in 1995. Excluding China, it is today 39.6 percent of global trade versus 31.5 percent in 1995.
“Since the financial crisis of 2008, countries in the Global South have increasingly questioned the legitimacy of a U.S.-led international economic order.”
The international financial and monetary system has long been structurally biased against countries in the Global South. For example, in the 1970s, the OPEC oil price increases were extremely costly for Latin America. The basic problem was the strategy of “recycling” the surpluses of OPEC nations, whereby they deposited their profits in U.S. and other international banks, which in turn lent the money to Latin American countries. This scheme bought some time, until the inflation crisis of the mid- and late 1970s led Fed Chair Paul Volcker to raise the Fed rates to 20 percent. Latin America’s interest payments on dollar-denominated debt soared while their currencies plummeted and triggered a massive debt crisis. Countries were then made to pursue perverse austerity policies as a condition of IMF credits and rollovers of private bank lending. This led to a lost decade of growth and worsening livelihoods.
A variation of the same syndrome afflicted Africa. In many countries, debt crises were exacerbated by corrupt deals between local leaders and Western investors. These deals were often financed by debt, but most of the profits ended up in offshore bank accounts. When the leaders were overthrown, the debt stayed on the books of the country and the citizenry, leaving the IMF to come in and impose crippling austerity conditions on debt refinancing.
Much of the Global South is in such a predicament again. The Fed policies after the financial crisis of 2008 lowered interest rates in the United States. Given the free flow of money around the world, investors poured a surge of money into the Global South, where they were able to reap higher interest rates and profits. The surge initially triggered economic growth and still more borrowing across the Global South. But when commodity prices fell in the second half of the 2010s and COVID-19 hit, followed by the effects of the Ukraine war and sanctions, climate shocks, and then another round of interest rate hikes in the U.S., all that finance fled back to the “safety” of the U.S., plummeting exchange rates and creating soaring debt levels in the Global South. Now, there are 3.3 billion people in the Global South spending more on external debt payments than on education or health, and the IMF has come to the “rescue” with the same austerity recipe. What developing nations need are sources of patient capital, not hot money.
On the trade front, the U.S. has increased tariff rates and promoted bilateral deals that favor U.S. investors. Meanwhile, official development funding by public institutions like the members of the OECD Development Assistance Committee has been cut, and funding by development banks is limited relative to development needs. This has come on top of the debt crises. For all of these reasons, developing nations need a wholly different recipe. The hope is that more South-South collaboration can bring it about.
THERE WAS A BRIEF PERIOD WHEN the rules of the global system were far more sensible and deferential to the need for nations to have autonomy to set their own policies. After the catastrophe of the Great Depression, the United States and its allies sought to construct a system that balanced expanding trade with national economic and social policies. At the Bretton Woods conference of 1944, inspired by J.M. Keynes and Franklin D. Roosevelt, world leaders endeavored to devise global rules that created space for national New Deals, insulated from the deflationary demands of private capital. The system included capital controls, fixed exchange rates to prevent speculation in currencies, and a lot of public financing. It allowed for an exceptional postwar recovery and reconstruction, and three decades of broad prosperity.
In 1944, much of the Global South was still colonies. As these nations gained their independence, their economies benefited indirectly by being able to expand exports to a growing world economy. Latin America enjoyed a measure of policy autonomy and three decades of decent growth.
However, as stagflation hit the U.S., the 1971 “Nixon Shock” ended dollar convertibility, unraveling the Bretton Woods system. Beginning in 1980, the neoliberal turn under Reagan and Thatcher emphasized deregulation, openness to speculative capital flows, fiscal discipline, and a reduced role for the state, particularly in the economic area. For the Global South, this shift often meant debt crises, demands for austerity, and “structural adjustment” policies that prioritized external capital and trade liberalization over domestic development. In the late 1990s, speculative money flows created major financial crises even in East Asian nations that otherwise had sound economies.
Since the financial crisis of 2008 in the U.S. and some European countries, countries in the Global South have increasingly questioned the legitimacy of a U.S.-led international economic order—and increasingly taken action to increase their economic autonomy. Since that time, the Global South has been engaged in what economist Ilene Grabel has referred to as “productive incoherence.” With the old paradigm weakening, no single model dominates, opening space for experimentation through new regional institutions, hybrid policies, and diverging institutional logics. It is within this contested terrain that countries in the Global South have been attempting to chart alternatives, from regional development banks and new monetary institutions to South-South trade and financial arrangements. The response to Donald Trump’s policies has reinvigorated this effort. But it needs more ambition and coordination.
THE WORLD BANK LONG DOMINATED official development finance, often imposing policies of the so-called “Washington Consensus” on borrower states. They included trade liberalization, openness to international finance, and a reduced economic and social role for the state. In recent years, the Bank had begun to shift toward more important investments in education, health, and climate change, but such lending may weaken in response to views and policies of the Trump administration. While the Global South does not want to abandon the World Bank and its Western-led counterparts, they are simultaneously building alternative banks that have new traction given Trump’s actions.
In Latin America, the Development Bank of Latin America and the Caribbean (CAF), which does not have the U.S. as a member, has been capitalized and recently issued a hybrid capital bond of $500 million—oversubscribed six times. This success shows that international private capital markets are willing to back Southern-led institutions. The CAF was already a larger provider of infrastructure finance than the U.S.-led Inter-American Development Bank or the World Bank in the region.
On the other side of the globe, the Asian Infrastructure Investment Bank (AIIB) was created as a Chinese initiative and now has 110 member countries and provides the same level of financing as the U.S.-led Asian Development Bank. Earlier this year, Brazil’s development bank (BNDES) secured $3 billion from the AIIB for renewable-energy projects. The AIIB also committed itself to doubling annual financing by 2030.
In parallel, the Shanghai Cooperation Organization (SCO) previewed plans to establish an SCO development bank to deepen economic integration across Eurasia—another institutional node that could bypass the World Bank’s dominance. China has also launched a new Global Governance Initiative aimed at offering an alternative architecture.
COUNTRIES IN THE GLOBAL SOUTH are also creating rivals to the IMF, more in the spirit of the original Bretton Woods. The “Asian IMF” is known as the Chiang Mai Initiative. It was created after the East Asian financial crisis of 1997, to enable members to bypass the IMF with cooperative swap arrangements and other sources of credit. It was IMF policy promoting currency speculation followed by austerity demands that caused the crisis. Africans are working to create their own IMF-like support system called the African Financing Stability Mechanism, and the most climate-vulnerable nations have just begun negotiations to create an IMF-like fund to protect them from climate shocks.
Of course, the front lines of Trump’s assault are in trade policy. Here, too, developing countries have been playing defense with individual responses to Trump’s tariff threats. Nevertheless, there has been some action that has been forward-looking.
In 2025, China announced duty- and quota-free access for African countries with which it holds diplomatic ties—expanding beyond the least-developed nations to a broader contingent. That signals not just generosity, but strategic realignment.
Yet the trade front, like others, remains fractured between pushback and accommodation. Many developing nations continue to sign new bilateral and free-trade agreements with Northern actors—Indonesia with Canada, the EU with Thailand, Malaysia, and the Philippines, U.K.-India, EU-Mercosur, and EU-Mexico. These agreements often transplant the same investor protections and restraints that Southern governments now wish to escape.
At the same time, many countries in the Global South are deepening partnerships with China to advance alternatives to the U.S.-led economic order, leveraging Beijing’s financial and trade clout while seeking to maintain policy autonomy. African states, for instance, are benefiting from China’s offer of duty- and quota-free trade access, infrastructure financing, and investment in renewable energy through the Belt and Road Initiative.
Kenya and Ethiopia are currently renegotiating their debts on projects with China, converting them from U.S. dollar–denominated loans to cheaper and longer-term loans in China’s currency, the RMB. This will safeguard these countries by slashing debt servicing costs and opening up fiscal space for development.
China is the main trading partner of several Latin American and Southeast Asian countries, which are similarly engaging with Chinese development banks and other Chinese financiers, but are increasingly requesting to renegotiate the terms of these deals in order to avert debt distress and to try and add local content requirements to ensure that investments support domestic economic upgrading rather than simply exporting Chinese goods and labor. Ecuador refinanced $3.2 billion in debt service to China, and Pakistan is working to renegotiate power purchase agreements with China. ASEAN just signed a new trade deal with China.
Governments are establishing frameworks to monitor financial flows, manage currency exposure, and coordinate with other Southern partners, ensuring that engagement with China strengthens, rather than undermines, their economic sovereignty. These dual strategies—collaboration with China coupled with defensive safeguards—reflect a pragmatic approach: harnessing China’s resources while resisting dependence or predation, a balance that will be central to any coherent Southern economic strategy.
THE GLOBAL SOUTH IS ALSO A FORCE for long-overdue and sensible reform of established global financial institutions, and a post-Trump U.S. administration would be wise to accept these ideas. At the 17th BRICS Summit in July 2025, leaders issued a joint declaration emphasizing the need for comprehensive reforms of the IMF, World Bank, and WTO. Specifically, they called for a realignment of IMF quotas to more accurately represent the economic standing of developing countries, advocating for a new quota formula that considers factors like economic output and purchasing power. Changes in World Bank capital shares is also on the agenda, including meeting the 2010 agreement that would guarantee that developing countries have a majority of shares in the Bank.
Trump’s assertive “America First” stance laid bare the fissures of a U.S.-anchored economic order. The Global South’s response—regional development banks, new reserve mechanisms, and trade deals beyond Washington—is not simply reactive resistance, but emergent institution-building. Resistance is essential—but only coherence can convert pushback into structural leverage. The neoliberal era may be receding, but whether the Global South can stitch together a new world order will depend on whether its experiments coalesce into a shared architecture.
In the short term, such a strategy could provide temporary relief from Trump’s retreat from multilateralism. In the hopeful event that more globally minded but people-centered alternatives to Trump come to power in the United States in the intermediate term, the U.S. would do well to embrace a more multipolar approach to global economic governance, or it may see the institutions it built be eclipsed by their alternatives.
Despite the fact that the U.S. wrote many of the rules, the U.S. needs to accept the realization that the Global South came to decades ago: that the system does not allow enough policy autonomy for national prosperity strategies. The U.S. needs to appreciate that it cannot prosper in isolation. A post-Trump U.S. administration could negotiate a new Bretton Woods–like arrangement, in the spirit of the original agreement, but recognizing that global trade and finance can be a partial means to national prosperity, but not ends in themselves. But the South shouldn’t wait for that leadership to walk through the door; it is time to develop new South-South institutions, which also give them a bargain for a new global order.
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