The ongoing tariff war is wreaking havoc on the global economy, warns Dr. Ngozi Okonjo-Iweala, Director-General of the World Trade Organization (WTO). In a press statement, Okonjo-Iweala expressed deep concerns over the recent trade measures announced by the United States, particularly those unveiled on April 2. The WTO Secretariat is closely monitoring the developments and engaging with several member states to address their concerns about the potential impact on their economies and the global trading system.
The latest round of tariffs, combined with protectionist measures introduced earlier this year, could result in a 1% contraction in global merchandise trade volumes in 2025. This marks a sharp downward revision of nearly four percentage points from earlier projections. Okonjo-Iweala stated that this decline is alarming and poses a real risk of a full-blown tariff war driven by cycles of retaliatory measures.
Despite the recent measures, about 74% of international trade still operates under the WTO’s Most-Favored-Nation (MFN) terms. However, this figure has dropped from 80% at the beginning of the year, signaling a disturbing trend toward protectionism. Okonjo-Iweala urged WTO members to stand together to safeguard these gains and manage the resulting pressures responsibly to prevent trade tensions from proliferating.
The WTO chief emphasized the organization’s role as a global forum for trade dialogue and dispute resolution. She encouraged member countries to use the WTO’s mechanisms to engage constructively and seek cooperative solutions before the situation deteriorates further. The WTO was established to serve as a platform for dialogue, prevent trade conflicts from escalating, and support an open and predictable trading environment.
Okonjo-Iweala’s warning comes amid an escalating tariff war between the US, China, Canada, and other economically powerful countries. China announced a 34% tariff on all goods imported from the United States in retaliation for a similar move by US President Donald Trump. The outcome of this trade dispute could shape the global economic landscape for years to come.
Many WTO members have reached out to the organization, expressing concerns about the potential impact of the tariff war on their economies. Okonjo-Iweala called on members to utilize the WTO forum to engage constructively and seek cooperative solutions. The WTO Secretariat is actively engaging with member states to address their questions and concerns.
A full-blown tariff war could have severe economic consequences, including:
- Trade diversion effects: Significant trade diversion effects could occur, impacting global trade and economic growth.
- Global economic instability: The tariff war could lead to global economic instability, affecting businesses, jobs, and livelihoods.
- Increased protectionism: The rise of protectionism could lead to a decline in international trade and economic cooperation.
The ongoing tariff war poses a significant threat to the global economy. Okonjo-Iweala’s warning serves as a call to action for world leaders to address the issue and find cooperative solutions. The WTO remains committed to supporting an open and predictable trading environment and preventing trade conflicts from escalating.
To mitigate the effects of the tariff war, WTO members should utilize the WTO forum to engage in constructive dialogue and seek cooperative solutions, manage the resulting pressures responsibly to prevent trade tensions from proliferating, and stand together to safeguard the gains made in international trade and prevent a decline in global economic cooperation.
