The WTO warns of the most serious trade disruptions since the organisation was founded

The global trading system is experiencing its longest period of disruption in 80 years, and the challenges facing trade rules in a “geopolitically divided world” could significantly reduce living standards, the World Trade Organisation (WTO) warned on Tuesday.

The WTO’s annual report states that the system is currently at a critical juncture, and the report “presents new evidence that a return to unilateral trade policies would come at a high cost”.

The WTO warns that such a shift could reduce global gross domestic product (GDP) by around 5 per cent and exports by 18.6 per cent by 2050.

“Global trade policy and the WTO are facing the most severe and prolonged disruptions since the multilateral trading system was established 80 years ago,” the report states.

The report reiterates the warning issued in March by WTO Director-General Ngozi Okonjo-Iweala, shortly after the start of the war against Iran initiated by the US and Israel.

“We have seen challenges to trade rules on a scale the likes of which have not been seen since the multilateral institutions were established in the wake of the Great Depression and the Second World War to ensure open, stable and predictable global trade“ – wrote N. Okonjo-Iweala in the report’s introduction.

According to her, cooperation in the field of trade “has helped to narrow the income gap between developing and developed economies and has contributed to peace amongst the organisation’s members”.

„“Although the global trade environment has changed significantly (...), the fundamental logic of the system – that it is more beneficial for all economies to cooperate rather than act unilaterally – remains as relevant today as ever,” – emphasised N. Okonjo-Iweala.

Calls to preserve what works

However, the outlook deteriorated when US President Donald Trump returned to the White House in January 2025 and began rapidly imposing tariffs, whilst geopolitical tensions also rose sharply, particularly in the Middle East.

The WTO identified several factors that have hampered cooperation, including shifts in the distribution of economic power and increasingly frequent and diverse state intervention in markets.

In assessing future prospects, WTO economists analysed projected economic growth under different scenarios.

“A split along geopolitical lines could reduce global GDP by around 5 per cent. In a world where the WTO were to disappear and be replaced by a network of free-trade agreements, the losses would amount to nearly 7 per cent,“– Ms Okonjo-Iweala told diplomats on Tuesday.

Furthermore, the cost of a weakening of multilateral trade would not be borne equally by all countries – the smallest and poorest economies would be particularly vulnerable.

“Conversely, if members were to purposefully strengthen multilateral cooperation in the field of trade, preserve what works and reform what does not, global GDP could increase by around 3 per cent,“ said N. Okonjo-Iweala.

Restrictions are on the rise

The WTO, which is set to publish its updated global trade forecasts on 8 October, remains the cornerstone of the rules-based global trading system – 72 per cent of world trade still takes place under its rules.

“At the same time, two years ago this figure stood at 80 per cent. The trend is worrying,” WTO Chief Economist Robert Staiger told the AFP news agency.

“Another sign that global trade is under pressure is that new tariffs and trade restrictions now apply to 11 per cent of global imports. This is the highest proportion in more than 15 years,” he said.

Although global trade indicators remain fairly strong, Mr Staiger said that artificial intelligence (AI) is helping the system to hold up.

“We must also acknowledge that part of this resilience may be due to AI and the AI boom, as well as the fact that the production of goods necessary for AI development is highly dependent on trade. The production of goods required for AI development, such as servers, factories, computers and data centres, requires a large number of imported goods, and this investment boom (...) may mask part of the global trade downturn that would otherwise be recorded“,” – explained R. Staiger.

However, R. Staigeris warned that “trade in the AI sector is generally limited to a relatively small number of countries that benefit from it.”

“Putting all your eggs in one basket and assuming that everything is fine simply because global trade continues to grow at a fairly rapid pace is somewhat risky,” he emphasised.