Agencies
The World Trade Organization (WTO) chief on Thursday urged nations to keep calm in the face of tariff threats, warning that any tit-for-tat trade wars prompted by U.S. President Donald Trump’s threats would have catastrophic consequences for global growth.
WTO Director-General Ngozi Okonjo-Iweala issued her appeal during a panel discussion on tariffs at the World Economic Forum annual meeting in the Swiss resort of Davos, in a week that saw Trump threaten tariffs against China, the European Union, Mexico and Canada.
A former Nigerian finance minister, Okonjo-Iweala starts her second term as head of the global trade watchdog this year at a time when tariff threats have raised the specter of trade wars.
On Thursday, she appeared to have reached a point of exasperation amid the panic of what might happen if the U.S. unleashes painful duties.
She urged cooler heads to prevail, quipping: “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.”
Okonjo-Iweala 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 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.
She asked 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.
“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.
She said she was “encouraged” by Trump’s decision to delay immediately imposing tariffs on imports from countries like Canada and Mexico and instead 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.”
