WTO warns of catastrophic impact of Trump’s tariffs trade war

Onome Amuge

The World Trade Organization (WTO) has issued a warning, stating that retaliatory trade wars triggered by U.S. President Donald Trump’s tariff threats would have catastrophic repercussions on global economic growth, according to Ngozi Okonjo-Iweala, the WTO director-general.

Okonjo-Iweala begins her second term at the helm of the international trade organization in a climate of escalating tensions, as Trump’s tariff threats have stoked fears of a potential trade war on the horizon.

Speaking at the World Economic Forum annual meeting in the Swiss resort of Davos, Okonjo-Iweala sais, “If we have tit-for-tat retaliation, whether it’s 25 per cent tariff (or) 60 percent and we go to where we were in the 1930s we’re going to see double-digit global GDP losses. That’s catastrophic. Everyone will pay.”

Drawing parallels between the current geopolitical climate and the period preceding World War II, the WTO director general pointed to the devastating consequences of trade restrictions following the United States’ ill-fated Smoot-Hawley Tariff Act of 1930, which prompted other countries to retaliate by imposing their own trade barriers.

“We’ve seen this movie, as I said, elsewhere in the 1930s with the Smoot-Hawley Act. It made it worse. We’re very much saying to our members at the WTO, you have other avenues, even if a tariff is levied, please keep calm,” she added, asking states to study their options and use the WTO’s system for resolving disputes.

While the WTO’s dispute settlement system, a key pillar of the global trade architecture, has been partially impaired since late 2019 due to former President Donald Trump’s repeated refusal to appoint new judges, WTO Director-General Ngozi Okonjo-Iweala remained cautiously optimistic about the situation.

Addressing the same event at the World Economic Forum (WEF), Okonjo-Iweala expressed her relief that Trump had opted for an alternative approach to implementing tariffs against trading partners like Canada and Mexico, opting instead for investigations into their trade practices.

Also speaking at the World Economic Forum event, Alexandre Parola, Brazil’s envoy, emphasised the detrimental effects of the United States’ political use of tariffs on the international rules-based system, cautioning against the adoption of these measures.

“Using tariffs politically, I think there’s negative spillover, which really hurts the international rules-based system. I think that’s a bad message,” Parola said.