WTO lowers trade forecast as tariff war reignites

Global economic growth could collapse by 7% if the United States and China continue tearing away from each other, WTO Director-General Ngozi Okonjo-Iweala warned on October 17 in Washington, according to Reuters.

Ngozi said she’s been personally reaching out to both governments to stop the trade fight before it spins out of control, describing the latest flare-up as “extremely concerning.”

She explained that the WTO has been monitoring the situation closely after another surge in tariff tensions between President Donald Trump’s administration and Beijing. “We’re obviously worried at any escalation of U.S.-China tensions,” she said, adding that both sides backed off earlier this year from a tariff battle that could have crippled global supply chains.

Ngozi said she hopes that happens again. “We are really hoping the two sides will come together and de-escalate,” she said. “Because any U.S.-China tensions and U.S.-China decoupling have implications not just for the two biggest economies in the world, but for the rest of the world.”

The WTO chief said both Washington and Beijing understand how damaging this could be, given how much the world relies on their trade. She said any decoupling that splits the planet into two separate trade blocs would mean “significant global GDP losses in the longer term, up to 7% global GDP losses and double-digit welfare losses for developing countries.”

Ngozi said the numbers reflect the harsh reality of what happens when supply chains and investment networks fracture.

WTO lowers trade forecast as tariff war reignites

Ngozi’s comments came right after the WTO downgraded its global trade outlook. The organization cut its 2026 global merchandise trade growth forecast from 1.8% to just 0.5%, blaming delayed impacts from the Trump tariffs that were reintroduced earlier this year.

However, the group raised its 2025 forecast to 2.4%, showing that some recovery might come before another dip sets in.

That optimism didn’t last long. Last week, China imposed new export restrictions on rare earth metals, vital for the technology industry, from chips to electric vehicles. In response, Trump announced a 100% tariff on Chinese imports starting next month, effectively escalating what had been a fragile truce.

Ngozi said these decisions could “intensify pressures on the system,” stressing that the world hasn’t even begun to feel the full effects of these tariffs yet.

She told G20 officials on Wednesday night that global financial stability can’t exist without global trade stability. “Pressures on the system have not eased and may intensify,” she said. “The full effects of recent tariffs are still to be felt. Trade diversion is fueling protectionist sentiment elsewhere. And escalating tensions between the United States and China remain a serious risk.”

WTO urges reform and global cooperation amid crisis

Despite all this turmoil, Ngozi said the global trade system hasn’t broken apart yet. She pointed out that 72% of world trade is still governed by WTO rules, even though Washington has been signing bilateral trade deals with other countries.

She said most WTO members have avoided taking sides in the tariff war, which she called a small sign of restraint amid the most serious policy shock the trade system has faced in eight decades.

Ngozi also said the crisis should serve as a wake-up call for reform. The WTO plans to make its system more flexible and efficient, better equipped for the realities of crypto-linked services, digital trade, and green industries shaping modern economies.

“There’s absolutely no doubt that there are global problems that cannot be solved by any one country alone,” she said. “You will need global cooperation to do it, and that’s where multilateralism will still be very, very relevant.”

She added that for people to value global institutions again, the WTO must reform itself. “At the WTO, we are ready to work on this,” she said. Ngozi also confirmed she held a meeting with U.S. Deputy Trade Representative Joseph Barloon, who was just confirmed as U.S. Ambassador to the WTO.

The WTO chief said she’s encouraged that the U.S. removed the WTO from its list of international budget cuts, and talks are underway to settle Washington’s unpaid dues to the trade body.

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