Okonjo-Iweala warns against trade war, encourages dialogue over tariffs

Ngozi Okonjo-Iweala, director-general of the World Trade Organisation (WTO), has called for dialogue and restraint in response to tariff threats by United States (US) President Donald Trump.

On January 20, Trump threatened to impose 25 percent tariffs on Mexico and Canada for failing to meet US immigration standards by February 1.

Speaking in an interview with CNN’s Fareed Zakaria, posted on his X account on Sunday, Okonjo-Iweala stressed the importance of engaging in constructive discussions through the WTO framework rather than resorting to retaliatory measures.

“To our members, I have also been saying, look, let’s not do any tit for tat. It’s not when you hear something from one member, you immediately apply counter-tariffs or do something else,” the WTO chief said.

“Let’s have a considered approach. We do have methods to deal with these issues and follow them.”

Responding to statements from Canadian Prime Minister Justin Trudeau about possible retaliatory measures, Okonjo-Iweala acknowledged the political pressure leaders face but encouraged them to pursue transparent and constructive dialogue.

She urged members to learn from history and avoid repeating mistakes, referencing the 1930s Smoot-Hawley Act, which worsened the Great Depression due to trade retaliation.

“Politicians need to defend themselves amongst their population so I am not surprised to hear that. But I do think that we have very responsible members of which Canada is one, the EU, the U.S, and that they are trying to follow the path,” Okonji-Iweala said.

“So what we are trying to do is encourage greater transparency among our members. So we get the facts and we can actually have a considered and mature dialogue.

“That is what we want not tit for tat. We’ve been there before when we had tit for tat in the 1930s. You know, the Smoot-Hawley Act resulted in this and it worsened the Great Depression.

“We’ve seen this movie before. So I’m encouraging members. I know we love reruns of old movies, but I don’t think this would be a particularly good rerun.”

‘INCREASED FRAGMENTATION COULD LEAD TO GLOBAL ECONOMIC LOSSES’

Okonji-Iweala also highlighted the resilience of global trade, noting that despite rising protectionism, trade has reached $30.4 trillion — higher than pre-pandemic levels — with 80 percent of global trade still operating under WTO’s most-favoured-nation terms.

However, she warned of the risks posed by increasing economic fragmentation, citing WTO research that estimates a 6.4 percent loss in the global gross domestic product (GDP) if the world splits into competing trade blocs.

“This is huge. This is an impact on everyone and this is $6.7 trillion loss. It’s like losing the economies of Japan and Korea combined. So we don’t want to see this increased fragmentation because it’s not good for anyone,” she added.

On January 21, Okonjo-Iweala called for calm over the tariff threats by Trump.

The WTO DG advised members to observe actual policy implementations before reacting, saying calmness is necessary during uncertain developments.