The Infrastructure of Primacy:
International Institutions, International Law, and the Geostrategic
and Socioeconomic Interests of the United States
Abstract
This paper argues that international institutions and international law constitute a structural extension of United States power rather than a constraint upon it. Drawing on recent developments and data from 2024 to 2026, including the Trump administration's sweeping programme of multilateral disengagement, escalating tariff measures, and the accelerating de-dollarisation initiatives of the BRICS bloc, it demonstrates that these frameworks reduce systemic risk, enhance U.S. economic performance, preserve dollar hegemony, and amplify geopolitical influence. The paper evaluates the short- and long-term consequences of institutional adherence versus erosion, concluding that the disengagement strategy pursued since January 2025 imposes quantifiable economic costs and accelerates geopolitical fragmentation to the detriment of U.S. national interests. The central argument is that the rules-based international order is not an external burden on American sovereignty but the very infrastructure of American primacy.
I. Order as Strategy, Not Constraint
The post-1945 international order, anchored in the Bretton Woods institutions, multilateral trade regimes, and codified international law, was not primarily a normative project but a strategic architecture designed largely by the United States to stabilise capitalism and prevent systemic great-power conflict. Seven decades later, the structural logic that motivated its construction remains intact, even as the domestic political consensus undergirding American participation has fractured.
The U.S. economy, exceeding $28 trillion in nominal GDP in 2025 and deeply integrated into global trade and finance, remains structurally dependent on this rules-based order. Roughly 40 percent of S&P 500 revenues are generated abroad, while the U.S. dollar accounts for approximately 57-60 percent of global foreign exchange reserves according to IMF COFER data. These figures illustrate a central reality: American prosperity is inseparable from global institutional stability.
That structural reality has been thrown into sharp relief since January 2025. The second Trump administration launched an unprecedented campaign of multilateral disengagement: withdrawal from the World Health Organisation, the United Nations Human Rights Council, the Paris Agreement, and the closure of USAID. By January 2026, a Presidential Memorandum directed the United States' withdrawal from 66 international organisations, including 31 entities within the United Nations system. Simultaneously, the administration imposed sweeping tariffs — with average effective rates reaching 7.7 percent in 2025, the highest since 1947 — generating retaliatory responses from major trading partners and producing market volatility not seen since the 2008 financial crisis.
This paper examines whether this strategy of institutional retrenchment serves or undermines U.S. national interests. The weight of evidence strongly suggests the latter. The question is no longer whether international institutions matter, but whether the United States can sustain its strategic primacy without them.
II. Macroeconomic Stability and the Management of Systemic Risk
II.i. Crisis Containment and Global Demand Stabilisation
Institutions such as the International Monetary Fund function as systemic stabilisers. During periods of financial distress, IMF-led interventions prevent localised crises from cascading into global contractions — an outcome of direct relevance to the United States given the deep exposure of its banks, institutional investors, and export-oriented corporations to global market conditions. The IMF's World Economic Outlook of October 2025 estimated global growth at approximately 3.0 percent, characterising the environment as fragile and subject to significant downside risks concentrated in financial tightening, trade fragmentation, and sovereign debt vulnerabilities.
The IMF is currently engaged in economic programmes with Egypt, Jordan, and Ukraine — three countries central to American security interests — and in active discussions regarding Lebanon. As one former Biden administration official has noted, these institutions play a critical and highly cost-effective role in advancing U.S. foreign policy goals across dozens of countries simultaneously. Without coordinated multilateral responses, regional crises in these strategically sensitive economies could produce sharper contractions and demand more expensive and less effective bilateral U.S. interventions.
The short-run implication is clear: IMF-led stabilisation reduces volatility in U.S. equity and credit markets. The long-run implication is equally important: it preserves the global growth environment that sustains U.S. capital accumulation, innovation, and corporate earnings.
II.ii. The Cost of Disengagement: Quantifying the Tariff Shock
The 2025-2026 tariff programme represents the most significant test of institutional disengagement in the modern era and provides preliminary empirical data on its costs. The Yale Budget Lab estimates that the cumulative effect of all 2025 tariffs, accounting for trading partner retaliation, reduces real GDP growth by approximately 0.9 percentage points in 2025 and leaves the long-run level of real GDP permanently smaller by 0.6 percent — equivalent to $160 billion annually in 2024 dollars. U.S. exports are projected to be 18.1 percent lower in the long run under this policy trajectory.
Research from the Tax Foundation estimates that the Trump tariff programme amounts to the largest U.S. tax increase as a percentage of GDP since 1993, raising effective taxes on U.S. households by an average of $1,500 in 2026. The average effective tariff rate of 7.7 percent in 2025, the highest since 1947, demonstrates the magnitude of the departure from the post-war trade liberalisation consensus.
Modelling by Rodriguez-Clare and co-authors using a dynamic quantitative trade framework projects that four years of elevated tariffs with full retaliation would reduce U.S. real wages by 1.4 percent by 2028 and generate an unemployment spike as tariffs eventually unwind. Crucially, the tariffs have not achieved their stated objective of meaningfully reducing the U.S. trade deficit, which fell by only $2.1 billion in 2025, driven by an increase in the services surplus rather than by any structural correction in goods trade.
In a further complication, on 20 February 2026, the U.S. Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not authorise the imposition of tariffs, striking down the legal basis for a substantial portion of the tariff programme. The resulting policy uncertainty has itself imposed economic costs, as businesses suspended investment decisions and global supply chains were disrupted during the period of legal ambiguity.
III. The Trade Architecture, Supply Chain Resilience, and Productivity
III.i. The WTO System and the Benefits of Rules-Based Trade
The multilateral trading system reduces uncertainty by codifying rules governing tariffs, subsidies, and dispute resolution. This lowers transaction costs for U.S. firms operating globally and underpins the legal predictability that significantly boosts foreign direct investment. Empirical research in international economics consistently shows that rules-based trade increases bilateral trade flows by 20 to 40 percent compared to non-institutionalised arrangements, and OECD and WTO data from 2025 indicate that sustained trade fragmentation could reduce global GDP by up to 5 percent over the long term, with advanced economies bearing the largest absolute losses due to their integration in high-value supply chains.
The administration's imposition of tariffs on Canada, China, Mexico, and the European Union, combined with its characterisation of national security as beyond the jurisdiction of WTO dispute settlement, has prompted formal WTO consultations from Canada, China, and the European Union. The United States has asserted that such actions are not susceptible to WTO review, a position that, if widely adopted, would effectively hollow out the organisation's dispute resolution function and remove the key mechanism that has prevented trading relationships from degenerating into politically-driven confrontation.
III.ii. Supply Chain Interdependence and the Limits of Decoupling
The 2025 tariff programme has disrupted supply chains in semiconductors, pharmaceuticals, and consumer electronics — sectors in which U.S. firms depend on globally distributed production networks that cannot be quickly or cheaply replicated domestically. The administration's signalling that pharmaceutical tariffs could potentially rise towards 200 percent by mid-to-late 2026 has produced significant uncertainty in healthcare supply planning.
International legal frameworks facilitate standards harmonisation, protect intellectual property, and enable cross-border production networks. Without them, supply chains become redundant and inefficient, inflationary due to duplication of production capacity, and vulnerable to political disruption. The resulting effect is structurally lower productivity growth — a permanent tax on the innovative capacity of the U.S. economy.
IV. Dollar Hegemony, Financial Power, and the Costs of Institutional Erosion
IV.i. Institutions as Pillars of Dollar Dominance
The global role of the U.S. dollar rests not only on the size of the American economy but on trust in U.S. legal systems, the stability of international financial institutions, and the depth and liquidity of U.S. capital markets. As of April 2025, according to the BIS Triennial Survey, the dollar was involved in 89.2 percent of all foreign exchange transactions globally, and the IMF's COFER data places the dollar's share of global foreign exchange reserves at approximately 56 to 58 percent — lower than its peak of 72 percent in 2001, but still far exceeding any competitor. Dollar dominance provides the United States with extraordinary advantages: lower borrowing costs, seigniorage benefits, and, critically, the ability to employ financial sanctions as instruments of foreign policy.
The IMF, World Bank, and global financial regulatory bodies reinforce these conditions by promoting transparency, standardising financial practices, and anchoring market expectations. U.S. officials have consistently used these institutions to advance American interests — appointing the World Bank's president, effectively approving the IMF's managing director, and retaining the sole veto power over major institutional decisions that require an 85 percent majority. As former IMF chief economist Maurice Obstfeld has noted, these institutions serve as ideal vehicles for projecting U.S. cultural, political, and economic influence, precisely because the United States wields disproportionate power within them.
IV.ii. The Tariff-Dollar Nexus: Evidence from Liberation Day
A critical finding from the 2025 tariff programme is its unexpected effect on the dollar. Standard economic theory predicts that tariff imposition should appreciate the imposing country's currency by shifting global demand inward. Instead, the dollar depreciated by more than 10 percent against other major currencies in the first half of 2025 following the Liberation Day tariff announcement of 2 April 2025 — its most significant depreciation in over 50 years.
Research by Hassan, Mertens, Wang, and Zhang, presented at the Brookings Papers on Economic Activity conference in September 2025, provides a theoretical and empirical account of this outcome: when tariffs are met with retaliation, the dollar weakens rather than strengthens, because the trade war erodes the dollar's safe-haven premium. Their model estimates that the tariff levels prevailing in mid-2025 had already raised U.S. interest rates by half a percentage point — a modest-sounding figure that carries enormous fiscal implications given U.S. debt-to-GDP ratios projected to exceed 120 percent by the early 2030s. Every increase in borrowing costs compounds the long-run fiscal burden and reduces the government's flexibility to respond to future crises.
The Brookings analysis further demonstrates that inhibiting trade flows through tariffs weakens the force underpinning the dollar's special role, with the potential loss of safe-haven status leading to higher U.S. interest rates, a lower world-market value of U.S. assets, and reduced inward investment. Morgan Stanley research projected an additional 10 percent dollar depreciation over 2026 to 2027 if tariff policies persist, cementing what some analysts have described as the end of the post-2010 dollar bull cycle.
IV.iii. The BRICS Challenge and Parallel Financial Architecture
U.S. institutional disengagement is occurring against a backdrop of accelerating efforts by the BRICS bloc — now expanded to include Egypt, Iran, the UAE, Ethiopia, and Indonesia, representing approximately 45 percent of global population and 35 percent of global GDP by purchasing power parity — to construct alternative financial infrastructure. These efforts include China's Cross-Border Interbank Payments System (CIPS), which processed the equivalent of $245 trillion in yuan-denominated transactions in 2025; the mBridge multi-CBDC platform; and the launch of the BRICS Unit, a pilot gold-backed settlement instrument in which 40 percent of the backing is in gold and 60 percent in member currencies.
The dollar nevertheless remains structurally dominant. The yuan accounts for less than 5 percent of global reserves; China's capital controls prevent full convertibility; and BRICS lacks the strategic unity required to coordinate a decisive challenge. India's February 2026 bilateral trade deal with the United States — agreeing to halt Russian oil purchases in exchange for U.S. tariff reductions — illustrated the limits of BRICS cohesion when individual members face strong bilateral incentives to align with Washington.
The relevant question, however, is not whether the dollar faces imminent displacement but whether U.S. policy is increasing or decreasing the rate of erosion. The evidence from 2025 to 2026 suggests the former. As the IMF's COFER data has shown a gradual decline from a peak reserve share of 72 percent in 2001 to approximately 57 percent in 2024, the combination of institutional withdrawal, tariff-induced dollar depreciation, and sanctions-driven incentives for dollar avoidance is accelerating a structural shift that, at sufficient magnitude, would permanently raise U.S. borrowing costs and reduce fiscal flexibility.
V. Geostrategic Influence, Alliance Cohesion, and the Legitimacy Premium
V.i. Structural Power and Embedded Leadership
International institutions allow the United States to exercise what Susan Strange termed structural power — the capacity to shape the rules within which all other states operate, rather than simply compelling specific behavioural outcomes through coercion. This capacity extends to setting regulatory standards adopted globally, directing development finance through the World Bank towards U.S. strategic priorities, coordinating multilateral sanctions regimes that impose costs on adversaries at comparatively low expense to the United States, and framing the normative environment within which states define their interests.
The Trump administration's approach has sought to preserve some of this leverage while reducing what it characterises as the cost of multilateral membership. Treasury Secretary Scott Bessent's statement that 'America First does not mean America alone,' delivered ahead of the World Bank and IMF spring meetings in 2025, signalled a conditional rather than absolute withdrawal. The administration has indeed used its continuing presence in the IMF and World Bank to advance energy priorities — successfully pressing the World Bank to lift its ban on nuclear energy financing and prompting the IMF to reorganise its climate and gender units. These outcomes illustrate that engagement, even at reduced levels, retains influence.
V.ii. The Legitimacy Deficit and Alliance Erosion
The broader pattern of disengagement, however, imposes a legitimacy cost that undermines the more targeted forms of influence the administration seeks to exercise. Allies are more likely to align with U.S. positions when policies are embedded in international law, when actions are coordinated through shared institutions, and when commitments appear credible and consistent. Unilateralism erodes trust and accelerates hedging behaviour. The imposition of tariffs on Canada, Mexico, and the European Union — close allies within existing treaty frameworks — produced diplomatic friction and domestic political pressures in those countries that have made future cooperation on issues of greater strategic significance, including China policy, more difficult to secure.
The United States' withdrawal from 66 international organisations, including bodies responsible for climate science (the IPCC), gender equality (UN Women), and trade development (UNCTAD), has created a legitimacy vacuum that China, the European Union, and other actors are actively seeking to fill. The French scholar's aphorism that the United States is uniquely capable of making enemies of its friends applies with unusual force to a strategy that simultaneously alienates allies through tariffs and reduces U.S. presence in the institutions through which the alliance system operates.
VI. Security Externalities and Conflict Prevention
International institutions reduce the probability of costly inter-state conflict by providing diplomatic channels for dispute resolution, increasing transparency about military capabilities and intentions, and establishing behavioural norms that raise the reputational cost of aggression. While great-power competition between the United States and China persists and in some dimensions has intensified, institutional frameworks lower miscalculation risks, enable crisis management mechanisms, and reduce escalation probabilities — outcomes of material value to a country whose defence budget already exceeds $900 billion annually.
The reduction of U.S. funding for UN peacekeeping operations — with $838 million in cuts announced in August 2025 — reduces the capacity of these operations in regions where American strategic interests are directly implicated. Instability in the Sahel, the Horn of Africa, and the Middle East has historically generated the conditions for terrorist recruitment, mass migration, and proxy conflicts that impose substantial costs on U.S. security. The cost-effectiveness calculation is straightforward: multilateral peacekeeping expenditures funded in significant part by other states typically cost the United States far less than bilateral military deployments to address the consequences of failed or fragile states.
VII. Domestic Socioeconomic Welfare and the Distributional Dimension
VII.i. Consumer and Labour Market Effects
International trade and institutional stability lower consumer prices, expand product variety, and support export-oriented employment. Despite the distributional challenges associated with globalisation, the aggregate effect on U.S. real income remains positive: trade contributes significantly to purchasing power, and global integration supports high-value sectors including technology, finance, and services in which the United States holds competitive advantages.
The tariff programme has imposed direct and measurable costs on households. The Tax Foundation estimates that the total tariff burden amounted to an average tax increase of $1,000 per U.S. household in 2025 and $600 per household in 2026, following the Supreme Court's partial invalidation of the IEEPA tariff authority. The distributional impact falls most heavily on lower-income households, for whom imported goods constitute a larger share of consumption expenditure.
VII.ii. Inequality and the Correct Policy Response
The legitimate grievances underlying political support for trade restriction — wage stagnation, deindustrialisation, and regional economic displacement — are real and deserve serious policy responses. However, the correct response lies in domestic policy measures including investment in education and workforce development, redistribution through the tax and transfer system, and strategic industrial policy in sectors of genuine national security importance — not in the dismantling of international institutions that provide net aggregate benefits.
Protectionism of the scale pursued in 2025 typically exacerbates inequality by raising prices for goods consumed disproportionately by lower-income households, reducing competitiveness in export sectors, and slowing the aggregate growth that generates fiscal capacity for redistributive programmes. The temporary surge in manufacturing employment projected by dynamic trade models is offset by larger contractions in services and agriculture, and by the welfare costs of higher prices across the economy.
VIII. The Reform Imperative: Engagement as the Strategic Response
International institutions are genuinely imperfect. Governance structures reflect the geopolitical realities of the mid-twentieth century rather than the distribution of economic power in the twenty-first. Representation imbalances persist that disadvantage large emerging economies. Bureaucratic inefficiencies accumulate over decades of institutional sedimentation. These are legitimate criticisms that warrant serious reform efforts.
The strategic response to institutional imperfection, however, is reform from within, not withdrawal. An institution reformed under U.S. leadership — with updated voting weights, enhanced accountability mechanisms, and modernised mandates addressing digital trade, climate finance, and pandemic preparedness — serves U.S. interests far more effectively than its replacement by a vacuum that rivals fill on less favourable terms. The creation of the BRICS New Development Bank, CIPS, and the mBridge payment platform illustrates the speed with which institutional gaps are occupied when the United States retreats. These alternatives, imperfect and fragmented as they currently are, will mature.
The UN's own reform process — including discussions on the Pact for the Future and the UN80 reform initiative seeking greater efficiency and reduced mandate overlap — provides channels through which a constructively engaged United States could shape the next generation of multilateral governance. The G20 discussions on Bretton Woods reform offer similar opportunities. Selective engagement, conditioned on specific reforms, is a coherent strategy. Blanket withdrawal is not.
IX. Short-Run and Long-Run Strategic Outcomes: A Comparative Assessment
The distinction between short-run and long-run consequences of institutional adherence versus disengagement is analytically critical and politically underweighted. Short-term signals of strategic independence — tariff impositions, organisational withdrawals, budget cuts — are politically legible in ways that the slow accumulation of structural disadvantage is not. But the evidence from 2025 to 2026 demonstrates that even the short-run costs are larger than their proponents anticipated.
Institutional adherence in the short run produces stabilised financial markets and reduced volatility, coordinated crisis responses that prevent costly contagion, and a predictable trade and investment environment that supports corporate planning and capital allocation. In the long run, it preserves a global growth environment that sustains U.S. capital accumulation and innovation, maintains dollar dominance and the exorbitant privilege associated with it, institutionalises U.S. leadership and structural power, and reduces the probability of large-scale conflict that would impose catastrophic costs.
Disengagement produces, in the short run, trade disputes and retaliatory measures, financial market instability of the kind observed in spring 2025, supply chain disruption, and measurable household welfare losses. In the long run, it produces a fragmented global economy in which the rules are written by others, the emergence of rival institutional blocs that operate outside U.S. influence, a gradual decline in dollar dominance that increases structural borrowing costs, and higher structural inflation and lower trend growth — a permanent reduction in American living standards relative to the attainable counterfactual.
X. Conclusion
The evidence assembled in this paper, drawing on developments through April 2026, supports a clear conclusion: international institutions and international law are integral to the United States' geostrategic and economic success, functioning simultaneously as stabilisers of the global economy, multipliers of American power, and anchors of the financial and legal trust upon which dollar hegemony depends.
The disengagement strategy pursued since January 2025 has already produced quantifiable costs. Real GDP growth is measurably lower than it would otherwise be. The dollar has depreciated substantially, raising U.S. interest rates and increasing the fiscal burden on a government that will face prolonged challenges of debt sustainability. Traditional allies have been alienated. Institutional vacuums have been created that rivals are actively filling. And the legitimacy premium that has historically allowed the United States to exercise structural power at relatively low cost is being steadily spent down.
None of this necessitates an uncritical defence of the status quo. The institutions of 1945 require modernisation; the governance structures of 1944 do not reflect the world of 2026; and the United States is entitled to demand greater burden-sharing from allies who benefit from American security guarantees. A strategy of assertive reform — conditioning engagement on specific institutional improvements, demanding more equitable burden distribution, and using U.S. leverage within institutions to advance its interests — would address these legitimate concerns without forfeiting the structural advantages that multilateralism provides.
The erosion of the rules-based international order will not liberate American power. It will diminish it, replacing structured influence with costly, uncertain, and fragmented competition in which the United States holds fewer advantages than it currently possesses. The lesson of 2025 is not that the international system failed the United States. It is that the United States, in retreating from the international system, is imposing costs upon itself that no rival could otherwise have imposed.
The central strategic insight is therefore clear: for the United States, the rules-based international order is not an external constraint on sovereign action. It is the very infrastructure of American primacy — and its maintenance is, accordingly, a core national interest.
Note on Sources
This paper draws on publicly available institutional data, peer-reviewed economic research, and policy analysis from 2024 to 2026. Economic estimates are drawn from the IMF World Economic Outlook (October 2025), the Yale Budget Lab, the Tax Foundation, and quantitative research published in the Brookings Papers on Economic Activity and VoxEU/CEPR. Data on institutional disengagement is sourced from official U.S. government documents, the Center for Global Development, and the Institut du développement durable et des relations internationales (IDDRI). Currency and reserve data are drawn from IMF COFER, the BIS Triennial Survey (2025), and the Atlantic Council. Information on BRICS financial initiatives draws on publicly reported developments through April 2026. All claims regarding empirical projections are attributable to the cited sources and reflect the state of available evidence at the time of writing.
