Geneva, Switzerland – US President Donald Trump’s worldwide tariff salvo could lead to an overall contraction of around 1 percent in global merchandise trade volumes this year, the WTO chief warned Thursday.
This, she said, would represent a drop of nearly four percentage points from the WTO’s previous projection.
Okonjo-Iweala urged WTO members to manage the tensions resulting the US measures responsibly.
“I’m deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade.”
Okonjo-Iweala stressed that despite the US measures “the vast majority of global trade” still flows under WTO’s so-called Most-favoured-nation (MFN) status, which bars countries from discriminating between their trading partners.
“Our estimates now indicate that this share currently stands at 74 percent, down from around 80 percent at the beginning of the year,” she said.
“WTO members must stand together to safeguard these gains.”
Okonjo-Iweala highlighted the fact that “the WTO was established to serve precisely in moments like this — as a platform for dialogue, to prevent trade conflicts from escalating, and to support an open and predictable trading environment”.
Trump rolls political dice with huge tariff gamble
“It’s a huge gamble,” Larry Sabato, a University of Virginia political scientist and author of the respected Crystal Ball newsletter, told AFP.
“And if the economy goes belly up, Republicans will pay an enormous price in both 2026 and 2028.”
Trump’s tariffs come just over a year and a half before US midterm elections, in which the party of the US president is often hammered on the economy.
The Republican party’s tiny minority in Congress could be in jeopardy if the tariffs start to bite.
And with Trump eying a long legacy for his movement — and refusing to rule out trying for a constitutionally barred third term — the next presidential election in 2028 will also be in mind.
Sabato said Trump was “risking his ace card — the handling of the economy — on a wild tariff plan being denounced by a large majority of mainstream economists.”
Trump’s stunning White House comeback relied heavily on his appeal to blue-collar voters who liked his pledge to “Make America Great Again.”
A core part of that plan was his decades-standing love of tariffs, which he said would bring back factories to US shores and stop America being “ripped off” by other countries.
The ex-reality television star clearly relished the moment as he unveiled the tariffs in the White House Rose Garden with a theatrical flourish.
He told an audience full of steel, oil and gas industry workers in hard hats that the levies would “give us growth like you haven’t seen before.”
‘Feeling the squeeze’
He acknowledged that there would be “complaints from the globalists” but said that “every prediction our opponents made… has been proven totally wrong.”
But Trump now needs everything to go right — and fast.
The Republican campaigned on a promise to lower inflation after Democrat Joe Biden’s presidency, but is now pursuing a policy that many economists say will lead to higher prices.
Importers often pass on the cost of tariffs to consumers, and a Yale study found the average US household could lose $3,800 a year from Trump’s levies.
Trump on Thursday likened it to an “operation” and said the “patient lived, and is healing” but US stocks led a global market rout in what opponents dubbed the “Trump Slump”.
And the reckoning could come sooner than the US midterms.
Polls show Trump’s honeymoon has already begun to fade, after an initial whirlwind few weeks of mass government firings and upheaval on everything from migration to foreign policy.
“I’m not sure the goodwill of the American public could be sustained until the midterms if they’re feeling the squeeze of tariffs or if the economy tanks,” said Barbara Trish, Professor of Political Science at Grinnell College.
Voters in Wisconsin already dealt Trump a symbolic blow this weekend when they elected a liberal judge to the state’s Supreme Court, despite his billionaire advisor Elon Musk pouring millions into the race.
They have further chances to weigh in later this year with at least one special election to the US House and some prominent state governor votes, added Trish.
Would Trump reverse course if voters start to flee?
Sabato said Trump could “pull back as the wreckage accumulates, and just declare victory” to his MAGA base — even though it was these blue-collar voters who would “feel the most pain.”
Trump’s previous gambling history suggests he may double down, and leave others to bear the cost.
The former real estate developer used to own four casinos in Atlantic City but the subsidiary that ran them filed for bankruptcy three times. The jewel in his crown, the Trump Plaza, was demolished with 3,000 sticks of dynamite in 2021.
