The Director-General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, has urged countries to remain calm and avoid escalating trade tensions despite recent threats of tariff impositions by the United States. Speaking at the World Economic Forum in Davos, Switzerland, on January 23, 2025, Okonjo-Iweala cautioned that a trade war could have disastrous effects on the global economy.
Okonjo-Iweala’s comments came in response to statements made by newly sworn-in U.S. President Donald Trump, who has warned of potential tariffs on several countries, including China, the European Union (EU), Mexico, and Canada. Trump’s administration has continued its tough stance on trade, a strategy that has raised concerns among international leaders and experts.
A Growing Trade Tension
The threats by President Trump are not new. During his earlier term, he imposed tariffs on various goods, particularly targeting China, in an attempt to balance the trade deficit between the two nations. This approach was widely criticized for triggering retaliatory measures and damaging global supply chains. Now, with Trump back in office, the rhetoric surrounding tariffs has become even more heated.
At the heart of the current situation are proposed tariffs, including a 10% tariff on Chinese products entering the United States and a 25% tariff on imports from Canada and Mexico. These moves are in response to ongoing political disputes and trade imbalances that have long been sources of tension between the countries involved.
Trump has also threatened to impose further tariffs on Russia if the ongoing conflict between Russia and Ukraine continues. This development adds another layer of uncertainty to an already volatile global trade environment.
Okonjo-Iweala’s Call for Caution
In her address at the World Economic Forum, Okonjo-Iweala urged nations to avoid reacting impulsively to tariff threats. She reassured WTO members that there are other diplomatic avenues to address trade disputes, and urged them to consider the long-term consequences of retaliatory measures. Okonjo-Iweala stressed the importance of maintaining calm, stating, “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.”
The WTO Director-General warned that a tit-for-tat approach to trade disputes, which could see tariffs escalate to 25%, 60%, or even higher, would mirror the trade wars of the 1930s. Such a scenario, Okonjo-Iweala cautioned, could lead to significant economic losses. “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,” she said.
Her warning is grounded in historical context. In the 1930s, global trade was severely disrupted by tariffs imposed by various nations, leading to the Great Depression. The aftermath of this period demonstrated the devastating impact that trade wars can have on economies around the world, and Okonjo-Iweala emphasized the need to avoid repeating such mistakes.
Global Implications
Okonjo-Iweala’s concerns are not just about the countries directly involved in the trade disputes. The effects of tariffs are felt globally, impacting supply chains, prices, and economic growth. Nations that rely on exports or imports from countries facing tariff restrictions often see their economies slowed or disrupted. For developing nations, the consequences can be even more severe, as these countries are often more vulnerable to external economic shocks.
A trade war between major economies like the United States, China, and the EU could result in widespread global economic instability. For Nigeria, this could lead to a rise in the cost of imported goods, from electronics to food products, while limiting access to international markets for Nigerian exporters.
Regional Tensions and Retaliation
The potential for retaliatory tariffs between the United States, Canada, and Mexico is especially tense. Following Trump’s threat to impose a 25% tariff on imports from these two countries, Canada has expressed its intention to defend its citizens and economy. The Canadian government has already indicated that it is preparing countermeasures, and there are fears that other countries may follow suit.
In the case of China, the United States’ threats could lead to further deterioration of the trade relationship. China, which has already engaged in retaliatory tariffs during Trump’s first term, could impose additional tariffs on American products, affecting industries such as agriculture, manufacturing, and technology.
The European Union has also been vocal in its opposition to the proposed tariffs, warning that the imposition of such measures would be detrimental to both sides. The EU, which is one of the largest trading partners of the United States, has threatened to respond with its own tariffs on American goods if necessary.
WTO’s Role in Maintaining Global Trade Peace
The World Trade Organization plays a key role in mediating international trade disputes and promoting cooperation between countries. As the leading global body for trade, the WTO facilitates discussions between member states to resolve conflicts and avoid the escalation of trade barriers like tariffs.
Okonjo-Iweala has been a prominent voice for multilateralism and diplomacy in trade relations. Her leadership at the WTO has been marked by efforts to improve dialogue between nations and promote free and fair trade practices. She has repeatedly emphasized the importance of negotiation over conflict and the need for nations to work together to address shared challenges.
The Road Ahead
As the world waits to see if President Trump will follow through on his tariff threats, countries are watching closely. The global economy is already facing numerous challenges, from the aftermath of the COVID-19 pandemic to the ongoing climate crisis. A trade war, Okonjo-Iweala warns, would add an unnecessary burden on already struggling economies.
For now, the WTO will continue to encourage dialogue and caution among its members. While tariffs are a tool that governments may use to protect their interests, Okonjo-Iweala’s message is clear: escalation through retaliatory tariffs is a path that should be avoided at all costs.
