One year ago at the Munich Security Conference, U.S. Vice President J.D. Vance stunned Europe’s leaders with a public scolding that scarred the continent into thinking about a future without Washington’s embrace. On the latest episode of FP Live, I spoke with a group of leaders on the main stage at this year’s Munich summit to check the pulse of the trans-Atlantic relationship. Our session was titled “Tariff-fying Times”—an obvious play on the White House’s economic coercion—and guests included World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala, German Vice Chancellor Lars Klingbeil, Finnish President Alexander Stubb, and U.S. Sen. Thom Tillis.

Subscribers can watch the full conversation on the video box atop this page or download the free FP Live podcast. What follows here is a condensed and lightly edited transcript.

Ravi Agrawal: Director-General Okonjo-Iweala, we’re now in year two of U.S. President Donald Trump’s second term. This time last year, the word you kept using was “chill.” You were telling us to wait and see what happens when it comes to tariffs. Well, now a year has passed, and we have some data. We know what’s happened. You’ve begun to sound a lot more concerned about the state of affairs.

Ngozi Okonjo-Iweala: When I said “chill,” it wasn’t that I wasn’t concerned. I was very concerned. But I meant that reacting quickly to these announcements without thinking through what kind of approach you need to have was not the best way to go. If you start a tariff war, can you carry it through? Would it be better to have dialogue? So that’s why I said “chill.”

RA: So take us to 2026 now. How concerned are you?

NOI: Oh, I’m still concerned. We’ve got a situation in which the U.S. average weighted tariffs have now gone from about 2.6 to about 18 percent in announced tariffs, according to our numbers. The actual applied tariffs are closer to 14 percent. That’s still a big leap in protective measures.

I will always say I may not agree with the United States’ unilateral actions or approach to dealing with the issues, but I do agree with a lot of their criticisms of the system. The system has not evolved and has not been quick to respond to the changing world. We may not like the action, but we must take the signal that we need to reform many of the things with the world trading system. This is where we are now.

I want to make a second point—and I know people don’t like to hear this—but in spite of the massive disruption of the system and the undermining of the global trade rules, the system is proving resilient. I will keep saying it: 72 percent of the world’s goods trade is still on WTO terms. Battered, bruised, but not broken. Those are my words. The system is still largely functioning. So, partly, this explains my calm, chill nerves.

I’ll end by saying that I am very proud of my members, because they didn’t descend into tit-for-tat with the United States. If they’d done that, the world would be much worse off than we are now.

RA: Vice Chancellor Klingbeil, about an hour ago we all heard Chancellor Friedrich Merz say that the international order is over. That sounds so different from what we’ve just heard from the director-general.

Lars Klingbeil: First of all, Chancellor Merz gave a very powerful and very good speech. He was orienting the whole Munich Security Conference, and he analyzed that the world order, as we know, is over.

He was very clear that Europe has to work very hard, that we are an attractive and also very powerful center in this world. Germany has to do the homework for that; Europe has to do homework. We can work on our European sovereignty. We can work on competitiveness. We can work on defense. If we do that, Europe will have a powerful place in this new world order.

And then there was also a very clear signal that we are looking for new partners. I’m really happy that after 26 years, we now have this EU-Mercosur deal. I’m very happy that we now have this agreement with India. And let me say, I’m convinced tariffs are bad for the people. Tariffs are bad for the economy on both sides of the Atlantic. But if the U.S. government is willing to go this way, we have to find other partners. We have to strengthen our economic growth.

RA: President Stubb, you represent a small country, at least by population size. And I’m worried when I look at new data from UNCTAD, the U.N. body on trade and development, which shows that U.S. tariffs gave a competitive advantage to bigger, rich countries over smaller ones. In the last year, that difference has been exacerbated. Richer countries have been able to strike their own special deals with the United States while smaller countries get left behind. What advice do you have for the world if we are headed into this new order where bigger countries can manage and the weaker ones suffer?

Alexander Stubb: Join the European Union. It gives you protection. (laughter)

RA: What about the rest?

AS: To rewind, I think what we’re seeing right now with tariffs, and protectionism in general, is the reversal of the world that we experienced after the end of the Cold War. The things that were supposed to bring us together—like currency, energy, trade, technology, even information—are now being weaponized.

Now, I want to counter your thesis a little bit. A country like Finland has not been hit any worse than Germany vis-à-vis the United States. Why? Because there’s exclusive competence on customs, there’s exclusive competence on trade, there’s an exclusive competence on competition policy, and there is exclusive competence on currency or monetary policy in the European Union. So we’re shielded from that. After the Greenland issue, when the United States threatened to raise tariffs to 25 percent on Finland—well, you can’t do that because then it’s 25 percent for the European Union. So we feel quite good in this place.

What should smaller states or middle powers do? I think we should lean in and support the multilateral trading institutions, such as the WTO. I think what Europe will end up doing is hedging and de-risking a little bit. That’s why you see a quick trade agreement finally with Mercosur. You see it in the trade agreement with India. I don’t exclude some kind of investment agreement in the long run with China either. You’re going to start seeing this type of behavior coming from other countries as well. Instead of leaning in on tariffs and a multipolar world and retaliation, people are going to say, “OK, let’s go back to the rules that existed because they were much more stable.” This pertains to small and big countries.

RA: Senator Tillis, you’ve emerged as a rare Republican lawmaker who’s criticized President Trump on the issue of tariffs. Are you getting a sense that one year in, the White House and Trump are getting less ideological on tariffs?

Thom Tillis: Actually, I just want to make it clear. I haven’t criticized President Trump on tariffs. I’ve criticized the people who have convinced him that this is the right way to move forward. Look, we have in—

RA: Hang on. Are you sure that the president himself doesn’t believe that tariffs are a good thing? I’m pretty sure he’s spoken in public—

TT: The United States is a large, complex country. If any president asserts that they by themselves could create strategies and execute on them, they’re lying to you. They rely on experts, and I believe that there are experts giving the wrong signals to the president on this issue.

RA: Senator, I’ll confess I’m slightly gobsmacked. It was my understanding that the president himself was very ideological about tariffs. But the basic question remains the same: If these advisors are pushing him in this direction that you clearly disagree with, is pressure on them coming to bear?

TT: Unless the world of economics has flipped since my time as a partner at Pricewaterhouse, how can you possibly expect prolonged imposition of tariffs in excess of 10 percent to not ultimately affect consumers? That’s just the way the world works. Most firms can absorb 10 percent tariffs, and they do so competitively until they figure out where the market settles down. But when you impose a 50 percent tariff on Brazil because you didn’t like a judicial outcome, that’s not a strategic use of tariffs.

RA: You’re saying what every single economist says. How is this not breaking through to the White House?

TT: The president has to process a lot of signals through a lot of different channels. On one hand, he’s hearing rightfully from [U.S. Ambassador to the U.N.] Mike Waltz and others that Europe has failed to pay a fair share in NATO. Now they’re catching up. But if you’re dealing with a country that is falling short on their burden-sharing, and we have a trade deficit with them, then those are two data points that the president is responding to as an executive, not as somebody who’s crafting the strategy.

Trump is hearing these signals and going, “OK, on one hand, we’re paying more for our mutual defense, and on the other hand, we’re leaving money on the table in terms of trade imbalances.” So you have to be strategic. In Davos, I said you have to de-risk at some level. But to make the statement that the free world, and the family of NATO nations, is no more is hyperbolic and will not withstand the test of time because you have a Congress and an American people that understand that our future, past, and present is rooted in Western rule-of-law democracy.

RA: That was certainly an unpopular feeling in Davos, given the threats against Greenland.

Director-general, to return to that earlier point about smaller countries being hard done by: the data suggests they are particularly disadvantaged by U.S. tariffs. What should the WTO do to allow smaller countries to have a more equitable rules-based system?

NOI: Well, we have to look carefully at the data. As the president [Stubb] said, it’s not all small countries. It depends on what your trade is. For African countries, this is one time where it might be good not to matter so much. A trade with 6 percent of our exports to the United States and 4 percent of imports—when we do the analysis, there is some impact, but at less than 1 percent of GDP growth, it’s not as bad as one might expect.

But that’s also not a good thing because it means the continent is not as connected or integrated into world markets. But the truth of it is: If it is a power game, small countries are disadvantaged. It’s not only about trade; it’s also about power and what you can be made to do or not to do outside of the multilateral system. Of my 166 members, about 140 have trade-to-GDP ratios north of 50 percent. So trade for them is an existential issue, whether it’s trade with the United States or elsewhere. For the EU, the trade-to-GDP ratio is about 93 percent. For the United States, 25 percent; China, 38 percent. So there are some large countries that can maybe make it on their own somehow but others who cannot.

The question is, what should be done? Those members and countries have to have agency. Yes, the United States has upended the rules-based order. Global trade rules have been undermined. But the United States makes up 13 percent of world imports and 11 percent of world trade. What is happening to the other 89 percent? I know the United States is the biggest economy and China is the second largest, but can the middle powers come together and say, as President Stubb is saying, “We find the system valuable. We are going to support it and therefore will support the rules-based system”? Since world trade is still largely on those terms, could we get together to keep what works within the system and fix what doesn’t? The system is resilient, but it’s not robust. So we need to make it robust by doing the necessary reforms, and that is what we are working on at the WTO.

I want us to have more agency. I’m tired of too much lamentation. “Oh, the United States has broken the world. Oh, this world has come to an end.” I’m sorry to say all this, but it would be better if people really sat up. Europe has the chance to lead the middle powers and support the system. And let’s all just get going on trying to do the right thing.

RA: It’s very hard to disagree with that. President Stubb, we just heard China mentioned, in terms of tariffs but also geopolitics more broadly. How are you thinking about the value proposition that Europe and the United States have vis-à-vis China? When you look at the next 30 or 40 years as a contest for power, which will involve much of the global south looking for partnerships and allies in a messy new order, what is the value proposition you’re trying to put forward?

AS: We’re living in a triangle of power: the global west, the global south, and the global east. The global east is led by China. The global west was led by the United States. And the global south felt it might have to choose between the two.

The choice right now is fairly binary. You have those who support a multipolar world, which is transactional, deal-based, and based on spheres of interest. And then you have those, like Ngozi and myself, who support a multilateral world and support the idea of international institutions, rules, norms, and cooperation. So then we have to ask ourselves, for demographic, economic, and geopolitical reasons, how to make a value proposition because it’s going to be the global south that decides the next world order.

We should base our foreign policy on values-based realism—fundamental human rights, democracy, freedom, rule of law—but be realistic. You cannot solve issues of trade, conflict, climate, or technology just with like-minded countries, so reach out. There is a battle for hearts and minds right now, to a certain extent, between China and the United States. So, as Europeans, we need to drive a dignified foreign policy, which means reaching out to the middle powers.

My final point is that we need to reform international institutions: the U.N., the WTO, the International Monetary Fund, and the World Bank. Why? Because they were created in the image of the West and the United States 80 years ago—their power structure is antiquated. If we want multilateralism to win, we need to give agency and power to the global south.