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Following Trump's reciprocal tariffs, the global economy is likely to lose pace. (Image credit: Video grab)

WTO, IMF warn US tariffs could trigger trade war, shrink global trade volumes

| @indiablooms | Apr 04, 2025, at 07:37 pm

New Delhi: The World Trade Organisation (WTO) and the International Monetary Fund (IMF) have sounded the alarm over the latest US reciprocal tariffs, warning that they could destabilise the global trade order and spark a prolonged trade war with major economies such as China and the European Union, The Economic Times reported.

The measures, announced on April 2, are expected to weigh heavily on global goods trade volumes.

WTO estimates indicate that the new tariffs, combined with those imposed earlier this year, could lead to a 1% contraction in global merchandise trade in 2024.

This marks a sharp downward revision of nearly four percentage points from previous projections, WTO Director-General Ngozi Okonjo-Iweala said in a statement.

The IMF, meanwhile, cautioned that these developments increase the risk of sluggish global growth and urged the US to ease trade tensions.

“We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth. It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty,” IMF Managing Director Kristalina Georgieva said.

Okonjo-Iweala underscored the broader impact of the US tariff moves, warning that a tariff war with retaliatory measures could lead to further trade declines.

She pointed out that while the share of global trade conducted under the WTO’s Most-Favoured-Nation (MFN) terms remains significant, it has fallen from 80% at the beginning of the year to 74% now.

She urged WTO members to preserve the gains of the global trading system and use WTO forums to engage in constructive dialogue.

The WTO was established to prevent such trade conflicts from escalating and to maintain an open, predictable trading environment, she added.

Calling for cooperation among member nations, Okonjo-Iweala stressed the need to resolve disputes through dialogue rather than escalating tariffs that could harm the world economy.

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