Okonjo-Iweala Warns Against Trade Wars, Highlights Risks to Global Growth

World Trade Organization (WTO) Director-General, Ngozi Okonjo-Iweala, has cautioned against retaliatory trade wars, emphasizing their potentially devastating impact on global economic growth. Speaking at the World Economic Forum in Davos on Thursday, she warned that escalating trade tensions, similar to the tariff threats issued by former U.S. President Donald Trump, could mirror the economic downturn of the 1930s.

“If countries respond with tit-for-tat tariffs, whether 25% or 60%, we risk double-digit global GDP losses. That would be catastrophic, with everyone feeling the consequences,” Okonjo-Iweala stated, urging WTO members to avoid hasty retaliation.

Drawing comparisons to trade policies enacted during the interwar period, she referenced the fallout from the 1930 U.S. Smoot-Hawley Tariff Act, which contributed to widespread economic instability. Instead, she encouraged countries to explore alternative solutions and rely on the WTO’s dispute resolution mechanisms.

Although the WTO’s appeals system has been partially inactive since 2019, following the U.S. vetoing judicial appointments. Okonjo-Iweala expressed optimism over recent trade decisions, such as the delayed imposition of tariffs on Canada and Mexico. She highlighted these steps as opportunities for negotiation and emphasized the importance of maintaining calm amidst trade disputes.