Ngozi Okonjo-Iweala, director general of the World Trade Organization (WTO), addressed the global trade war and its implications during a visit to Tokyo on May 13, 2025.

She described the trade environment as challenging but noted that there are still opportunities to address issues and explore new trends in global commerce.

According to the WTO’s updated forecasts from April, global merchandise trade volume is expected to decline by 0.2% in 2025. This marks a significant decrease compared to earlier projections.

A recovery is expected in 2026, with trade projected to grow by 2.5%.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Historical precedents show trade wars rarely achieve their intended economic aims

The current tariff escalation mirrors previous trade conflicts that consistently produced unintended consequences and economic harm.

The 1930 Smoot-Hawley Act, which raised tariffs on thousands of imported goods, triggered retaliatory measures from trading partners that contributed to a devastating 61% drop in US exports by 1933, deepening the Great Depression 1.

Similarly, the 1987 trade war with Japan saw the US impose tariffs on $300 million worth of Japanese electronics, yet achieved only minor reductions in trade deficits despite Japan choosing not to retaliate 1.

More recently, the 2002 steel tariffs imposed by President George W. Bush led to retaliatory measures from the EU and ultimately resulted in job losses in steel-using industries that outweighed any benefits to steel producers 1.

These historical examples demonstrate why the WTO now projects a 0.2% decline in global merchandise trade volume for 2025, directly attributable to the introduction of new tariffs and trade policy uncertainties 2.

2️⃣ Trade wars create regional winners and losers as supply chains adapt

The WTO’s latest forecasts reveal stark regional variations in how the current trade conflict affects different parts of the global economy.

North America is projected to experience the most severe impact with a 12.6% decline in exports and a 9.6% drop in imports, while Asia is expected to maintain modest growth in its trade flows despite the global slowdown 2.

This regional divergence explains why countries are pursuing different strategies in response to US tariffs, from the EU’s “zero for zero” tariff proposal for industrial goods to China’s immediate retaliatory measures and Canada’s aggressive countermeasures targeting CA$30 billion of US goods (approximately US$20.6 billion) 3 4.