In recent years, the increasing invocation of national security exceptions in trade disputes has strained the coherence of the multilateral trading system. This paper explores the legal and geopolitical implications of Article XXI of the GATT, focusing on how its growing use—particularly by powerful states—challenges the legitimacy of WTO dispute settlement mechanisms. Addressing a significant gap in legal scholarship, the research examines the tension between sovereign discretion and multilateral accountability, an area complicated by vague treaty language and political misuse. The study’s main objective is to assess whether existing WTO frameworks can effectively constrain the abuse of the national security exception while preserving state autonomy. Using a qualitative doctrinal methodology enriched by comparative legal analysis and a focused case study on Malaysia, the paper evaluates WTO rulings (notably DS512 and DS526), regional trade practices, and Malaysia’s middle-power diplomacy. The findings reveal a shift in WTO jurisprudence toward legal scrutiny of national security claims, emphasizing proportionality, necessity, and good faith. Malaysia’s cautious, multilateral approach offers a model for smaller states navigating coercive trade environments. The study concludes that reforming Article XXI is vital to maintaining the legitimacy of the rules-based trading order amid evolving geopolitical and economic challenges.