The World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala said on Thursday that any tit-for-tat trade wars would have catastrophic consequences for global growth in a debate where US President Donald Trump’s tariff threats were discussed.
“If we have tit-for-tat retaliation, whether it’s 25 percent tariff (or) 60 percent 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,” said Ngozi Okonjo-Iweala at the World Economic Forum in Davos.
The WTO director-general 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.”
She recalled the fallout from the Smoot-Hawley Tariff Act in the United States during the Great Depression in 1930, which prompted retaliation and worsened the global economic crisis at the time.
“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.
“If we have tit-for-tat retaliation, whether it’s 25 percent tariffs, 60 percent, and we go to where we were in the 1930s, we are going to see double-digit global GDP losses, double-digit. That’s catastrophic.”
Also on Thursday, European Commission Executive Vice-President, Valdis Dombrovskis said the EU is open to discussing purchases of energy and arms from the US to ward off tariffs that Trump has threatened to impose on the bloc.
Trump has vowed to address a long-running deficit in goods trade with the EU, either through tariffs of more oil and gas exports.
Dombrovskis, who is in charge of the economy at the bloc’s executive, said the EU would defend its rights and interests if tariffs were imposed and referred to the retaliatory duties the EU imposed on US imports when EU steel and aluminium were hit by tariffs during Trump’s first term.
First and foremost though, the EU wanted to engage with the new US administration, Dombrovskis told Reuters in an interview in Davos.
He said US liquefied natural gas (LNG) imports had proven helpful when Russia turned off most gas supplies to Europe in 2022 after the conflict in Ukraine started. The US is now the EU’s largest LNG supplier.
“We’re seeking alternative suppliers,” he said. “So we had a good cooperation over the last couple of years, and from our side we are ready to see how to further that.”
Europe has said another avenue could be military spending, given Europe’s need to strengthen its defense capabilities, which would require strong cooperation within NATO.
“So certainly there is scope also to discuss how we further strengthen also our military cooperation and military-industrial cooperation,” Dombrovskis said.
