Ngozi Okonjo-Iweala, the Director-General of the World Trade Organization (WTO), has cautioned nations about the dangers of escalating trade wars through retaliatory tariffs.
Speaking during a panel discussion on tariffs at the World Economic Forum held in Davos, Switzerland, Okonjo-Iweala described the potential consequences of tit-for-tat tariffs as “catastrophic” for the global economy.
Her remarks come at a time of growing tensions in global trade, with threats of new tariffs from major economies like the United States. This week, U.S. President Donald Trump made waves by threatening to impose tariffs on China, the European Union, Mexico, and Canada, which has sparked concerns about a new trade conflict.
During the discussion, Okonjo-Iweala called for calm and reasoned approaches to resolving trade disputes.
“Please let’s not hyperventilate,” she said, adding, “I’ve been saying to everybody: could we chill, also. I just sense a lot of hyperventilation.”
She pointed out that the WTO provides alternative mechanisms for resolving trade disputes without resorting to retaliatory measures.
The WTO chief referenced a historical example to underline her concerns, recalling the Smoot-Hawley Tariff Act implemented by the United States during the Great Depression in 1930. The act triggered retaliatory tariffs from other nations, worsening the global economic downturn.
“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,” she said.
“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.”
