GENEVA (AN) — The head of the World Trade Organization cautioned that U.S. President Donald Trump's new round of tariffs on U.S. imports could spark a global trade war – and cut global trade by as much as 1% this year.
That possibility turned to reality on Friday when China said it will impose a 34% tariff on U.S. imports starting on April 10, matching Trump’s tariffs for China. "This practice of the U.S. is not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice," China’s finance ministry said.
WTO Director-General Ngozi Okonjo-Iweala, who has served as a World Bank managing director and Nigerian finance minister, said on Thursday that WTO's initial estimates point to an "overall contraction of around 1% in global merchandise trade volumes this year, representing a downward revision of nearly four percentage points from previous projections."
"I'm deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade," she said, adding that 74% of global trade still flows under WTO terms, but that is down from 80% at the start of the year.
"Trade measures of this magnitude have the potential to create significant trade diversion effects," she said of WTO's 166 member nations, accounting for 98% of global trade. "I call on members to manage the resulting pressures responsibly to prevent trade tensions from proliferating."
European leaders vowed to retalitate in a unified manner against Trump's punishing new across-the-board tariffs, which caused markets to tumble and fears of a global recession sparked by U.S.-focused trade wars.
European Commission President Ursula von der Leyen said the tariffs imposed on virtually every U.S. trading partner are "a major blow to the world economy" that will lead to higher costs and inflation.
"The global economy will massively suffer," she said from Uzbekistan, where the first E.U.-Central Asia Summit was being held to strengthen ties. "Uncertainty will spiral and trigger the rise of further protectionism. The consequences will be dire for millions of people around the globe."
Markets in Asia, Europe and the U.S. plunged as political and business leaders among the world’s biggest economies quickly reacted to Trump’s latest round of tariffs, describing them as unwarranted and counterproductive.
Trump announced at a White House ceremony on Wednesday that he was imposing a universal 10% tariff on all imports into the U.S. starting on April 5 and additional tariffs on around 60 countries starting on April 9.
He also imposed immediate tariffs of 25% on all cars shipped to America from other countries, which accounted for nearly half of the 16 million new cars Americans bought last year. Most come from automaker hubs Mexico and Canada, which were exempted from the 10% baseline tariff.
The Trump administration's reciprocal tariffs are calculated as "the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of its trading partners," the U.S. Trade Representative's office says. "This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing."
Trump described the moves as payback for trading partners taking advantage of the U.S. economy – which he dubbed a "national emergency" – but said "relatively speaking, we’re going to be very kind" and the tariffs would boost domestic production and lead to a "rebirth of our country."
Passing on costs to U.S. consumers and businesses
The European Union was hit with a 20% tariff overall. Last year, the E.U. shipped $605 billion in goods to the U.S. and imported $370 billion from the U.S., which had a growing trade deficit, according to U.S. figures.
Von der Leyen warned that Europe would take a unified approach to the tariffs and the European Union was preparing countermeasures. "If you take on one of us, you take on all of us," she said.
Switzerland said it faces "particularly high additional tariffs compared to other U.S. trading partners with a similar economic structure (E.U.: 20%, U.K.: 10%, Japan: 24%)," and that the "calculations of the U.S. government are not clear." It resolved to "work towards a solution" with U.S. authorities.
Japan, meantime, did not specify any retalitation, but called the new 24% tariff on goods "extremely regrettable," and said it may break World Trade Organization rules and the two countries' trade agreement.
WTO rules say countries can break a commitment by raising a tariff but only "with difficulty," because they must negotiate with the countries most concerned – and that could lead to compensation for the loss of trade.
The White House quoted trade groups and political allies praising Trump because he "made clear to the world that the days of economic surrender are over." Outside his orbit, many economists and business leaders say the tariffs, which raise funds for the government, will drive up prices for U.S. consumers and manufacturers, who will shoulder most of the impact.
"Tariffs will have a devastating impact on thousands of small businesses across the nation, and the discussion of further tariffs on other countries is creating uncertainty," the U.S. Chamber of Commerce said.
"Even those," it added, "that can pass the cost of tariffs on to customers immediately say they are worried the added costs will impact their ability to remain competitive and profitable — or to grow."
This story has been updated with additional details.
