The World Trade Organization’s (WTO) chief issued a warning on Thursday about the potentially disastrous impact of trade wars on global economic growth.
What Happened: Ngozi Okonjo-Iweala, the WTO’s Director-General, voiced her concerns during a debate at the World Economic Forum in Davos, Reuters reported. The conversation centered around the tariff threats posed by U.S. President Donald Trump.
Okonjo-Iweala warned that if a “tit-for-tat retaliation” trade war breaks out, with tariffs varying between 25% to 60%, the world might experience a situation akin to the 1930s. This could lead to double-digit global GDP losses, a scenario she termed as “catastrophic.”
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“Everyone will pay,” cautioned the WTO chief, underlining the universal repercussions of such a trade conflict.
Why It Matters: These remarks come in the wake of Trump’s announcement of a potential 10% tariff on Chinese goods, which could be implemented as early as Feb. 1. This move has sparked concerns about a renewed trade conflict between the U.S. and China.
US-listed Chinese stocks initially surged on Tuesday, buoyed by President Trump’s inauguration speech, which surprisingly didn’t target China or impose immediate tariffs. However, the stocks — such as Baidu Inc. BIDU, Alibaba BABA, Li Auto Inc. LI, and Xpeng Inc. XPEV — were trading lower in Wednesday premarket after the president’s subsequent comments.
Despite the potential economic impact, some industry leaders, such as Jamie Dimon, have expressed support for Trump’s proposed tariffs, citing national security benefits. "If it's a little inflationary, but it's good for national security, so be it. I mean, get over it," Dimon said.
Canada, a key player in U.S. trade, has also indicated its readiness to respond with tariffs if the U.S. initiates a trade conflict. “As we did last time, we are ready to respond with tariffs as necessary,” the outgoing Canadian prime minister said. In 2018, Canada swiftly responded to the Trump administration’s tariffs on steel and aluminum by imposing its own tariffs on various U.S. goods. These targeted goods included household appliances and whiskey, among others.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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