WTO sounds alarm over global trade as fragmentation threatens 5% GDP hit
The WTO warns that a fractured global trading system could cut world GDP by 5% by 2050, as tariffs, geopolitical tensions and a retreat from trade rules threaten living standards.
The World Trade Organisation (WTO) has issued a warning on Tuesday about the global trading system facing its most significant disruption in recent history due to challenges to trading rules that could severely impact living standards in a fragmented world. The WTO's annual report highlights that a return to unilateral trade policies could diminish global GDP by approximately five percent and reduce exports by 18.6 percent by 2050.
The report echoes the concerns raised by WTO Director-General Ngozi Okonjo-Iweala in March, shortly after the US-led war on Iran, stating that trade rules have been challenged on a previously unseen scale since the establishment of multilateral trading institutions after the Great Depression and World War II. Okonjo-Iweala emphasized that trade cooperation has historically helped reduce income gaps between developing and advanced economies and contributed to peace among member nations.
However, the outlook has worsened following US President Donald Trump's tariff blitz since January 2025 and heightened geopolitical tensions, especially in the Middle East. The WTO attributes the strain on cooperation to shifting economic power and the increasing diversity of government intervention in markets. If geopolitical lines fragment trade, global GDP could decrease by five percent, while a complete disappearance of the WTO and its replacement by a network of free trade agreements could lead to a loss of seven percent.
The effects would be particularly detrimental to the smallest and poorest economies. WTO economists predict that purposeful actions to strengthen multilateral trade cooperation could boost global GDP by around three percent. Currently, 72 percent of global trade still operates under WTO rules, a decrease from 80 percent two years ago.
New tariffs and trade restrictions cover 11 percent of global imports, the highest coverage in over 15 years. Although global trade figures remain robust, artificial intelligence may be contributing to the system's resilience, as AI-enabling goods are highly trade-intensive. However, the benefits of AI trade may be unevenly distributed among nations.
Written by urgent.news from IOL's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
