Trade wars sparked by Trump tariffs would be ‘catastrophic’, WTO chief says

The World Trade Organization chief said on Thursday that any tit-for-tat trade wars prompted by U.S. President Donald Trump's tariff threats would have catastrophic consequences for global growth, urging states to refrain from retaliation.

WTO Director-General Ngozi Okonjo-Iweala, a former Nigerian finance minister, starts her second term as head of the global trade watchdog this year at a time when Trump's tariff threats have raised the spectre of trade wars.

"If we have tit-for-tat retaliation, whether it's 25% tariff (or) 60% 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," Okonjo-Iweala said at the World Economic Forum annual meeting in the Swiss resort of Davos.

She was drawing a parallel with the period between the two World Wars when countries adopted trade restrictions in response to a U.S. tariff act in 1930.

"We've seen this movie, as I said, elsewhere in the 1930s with the Smoot-Hawley Act. It made it worse," she said.

"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.

That system has been only partly operational since the end of 2019 when Trump's repeated vetoes of judge appointments incapacitated its top appeals court.

Okonjo-Iweala said she was "encouraged" by Trump's decision to hold off on immediately imposing tariffs on imports from countries like Canada and Mexico, opting instead to mandate investigations into trade practices.

At the same WEF event, Brazil's envoy urged Washington to refrain from adopting tariffs in the first place.

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