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The Trump administration’s tit-for-tat tariff war threatens to split the global economy into hostile trading blocs, the head of the World Trade Organization warned on Tuesday. The effect could be a 7% hit to global GDP, she said.
Speaking at Semafor’s The Next 3 Billion summit, WTO Director-General Ngozi Okonjo-Iweala cited WTO modeling showing that allowing the multilateral rules-based system to erode further under retaliatory tariffs could trigger a 20% collapse in global trade. But a systemic overhaul of the WTO could unlock $3 trillion in new economic output by 2050, according to the group’s own estimates.
Her warnings reflect a chaotic global trade environment unleashed by US tariffs just over a year ago, which has forced middle-power economies into a scramble for economic cover. Just last week, the EU invited Canada — battered by a 50% US tariff on $20 billion worth of goods — to become the EU’s first-ever “associate member” in a historic bid to shield middle powers from American economic coercion.
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Even so, Okonjo-Iweala noted that global commerce has shown underlying resilience, buffered in part by the AI investment boom. Tech infrastructure trade drove over 40% of trade growth last year, while nearly three-quarters of world trade continues to operate under standard WTO terms.
“Just because the system is resilient doesn’t mean it’s robust,” she said, adding that “if we don’t do necessary reforms to the system, I think the rules could be further eroded.”
The reforms center on breaking veto-heavy decision deadlocks, bringing poorer economies into global supply chains, cracking down on unfair state subsidies and rewriting outdated 20th-century trade rules. “The work has started. It’s going to be tough,” she told attendees. “But I’m hopeful members now agree that status quo is not an option.”
Okonjo-Iweala also urged companies scrambling to bypass US duties to look beyond standard Asian alternatives and embrace a “China plus Africa” strategy to secure critical mineral supply chains.