Trump’s Global Tariffs Could Shrink Trade by 1%, Warns WTO Chief

The global trade landscape just got a major shake-up. In response to President Donald Trump’s sweeping new tariffs, the head of the World Trade Organization (WTO) has issued a stark warning: we could see global merchandise trade volumes contract by around 1% this year.

The warning came on Thursday from WTO Director-General Ngozi Okonjo-Iweala, just one day after Trump launched a fresh round of tariffs that targeted countries across the board.

The U.S. president imposed a blanket 10% tariff on all nations, along with much steeper duties on key trading partners like China and the European Union. These new levies add to a growing list of protectionist measures introduced since Trump’s return to office in January.

“These measures, coupled with those introduced since the beginning of the year, could lead to an overall contraction of around 1 percent in global merchandise trade volumes,” Okonjo-Iweala said in a statement.

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This projected 1% contraction marks a sharp downgrade — nearly four percentage points below the WTO’s earlier estimates. The implications for global economic growth could be significant, particularly in an already fragile post-pandemic recovery environment.

Okonjo-Iweala emphasized that while the situation is still developing, the signs are troubling. She voiced deep concern over the potential for an escalating tariff war, with countries engaging in retaliatory measures that could send trade flows — and trust — spiraling.

“The potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade is very real,” she warned.

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The WTO chief also highlighted a worrying shift: the share of global trade conducted under Most-Favoured-Nation (MFN) rules — a principle that ensures non-discriminatory trade treatment among WTO members — has fallen to 74%, down from around 80% at the start of the year.

This decline suggests an increasingly fragmented global trade environment, as more countries resort to bilateral or retaliatory measures rather than rules-based cooperation.

“WTO members must stand together to safeguard these gains,” Okonjo-Iweala urged. “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.”

As trade tensions rise, this could be a defining moment for the multilateral trading system. The WTO is calling on its members to step back from the brink, engage in constructive dialogue, and preserve the hard-earned gains of decades of trade liberalization.

Stay with Scoophub as we continue to track the ripple effects of this growing trade conflict.