By Abiola Olawale
The Director-General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, has issued a strong warning regarding the potential economic fallout from escalating trade tensions, particularly in the light of United States President Donald Trump’s threats to increase tariffs.
The WTO chief described the possible scenario of tit-for-tat tariffs as “catastrophic,” predicting double-digit losses in global GDP if such retaliatory measures are adopted broadly.
This comes after Trump’s proposed tariffs aimed at several countries, including China, Canada, Mexico, the EU countries, others, with intentions to leverage these levies to address issues like immigration and drug trafficking.
These threats have sparked concerns about initiating a global trade war.
Okonjo-Iweala, who issued her appeal during a panel discussion on tariffs at the World Economic Forum in Davos, Switzerland, said the tariffs threat could lead to trade wars.
According to her, the global economy cannot afford trade wars as they could potentially reduce economic growth, higher inflation, and job losses as countries retaliate with their tariffs, thereby disrupting global trade flows.
The WTO director-general urged cooler heads to prevail, quipping: “Please let’s not hyperventilate. I know we are here to discuss tariffs. I’ve been saying to everybody: could we chill, also? I just sense a lot of hyperventilation.”
She recalled the fallout from the Smoot-Hawley Tariff Act in the United States during the Great Depression in 1930, which prompted retaliation and worsened the global economic crisis at the time.
She continued: “We are very much saying to our members at the WTO: you have other avenues. Even if a tariff is levied, please keep calm, don’t wake up, and without the necessary groundwork, levy your own.
“If we have tit-for-tat retaliation, whether it’s 25 percent tariffs, 60 percent, and we go to where we were in the 1930s, we are going to see double-digit global GDP losses, double-digit. That’s catastrophic.”
