The World Trade Organization has warned that the global trading system is facing its “most serious and sustained disruptions” in 80 years, as growing protectionism and geopolitical tensions threaten international trade and economic growth.
Gatekeepers News reports that the WTO issued the warning in its annual report on Tuesday, saying the global trading system had entered a decisive phase amid mounting challenges to multilateral trade rules.
The organisation said a shift towards unilateral trade policies could impose significant economic costs, with a reversion to such policies potentially reducing global gross domestic product by about five per cent and exports by 18.6 per cent by 2050.
“Global trade policy and the WTO are experiencing the most serious and sustained disruptions since the multilateral trading system was created 80 years ago,” the report said.
WTO Director-General Ngozi Okonjo-Iweala echoed the concern in the report’s preface, saying trade rules were being challenged on an unprecedented scale.
“We have seen trade rules challenged on a scale unseen since multilateral institutions were created to underpin open, stable and predictable global trade in the wake of the Great Depression and the Second World War,” she wrote.
Okonjo-Iweala said international trade cooperation had “helped narrow income gaps between developing and advanced economies, and contributed to peace among members”.
Although “the global trading landscape has changed significantly,” she said, “the founding logic of the system, that all economies are better off cooperating rather than acting unilaterally, remains as relevant today as ever”.
Geopolitical fragmentation
The WTO said the outlook had deteriorated following US President Donald Trump’s return to the White House in January 2025 and his subsequent tariff measures, alongside rising geopolitical tensions, particularly in the Middle East.
It identified several factors undermining trade cooperation, including shifts in global economic power and the increasing use and diversity of government interventions in markets.
WTO economists assessed the potential impact of different scenarios for the global economy.
Okonjo-Iweala told diplomats that “fragmentation along geopolitical lines could reduce global GDP by about five percent”.
She added that “in a world where the WTO disappears and is replaced by a network of FTAs [free trade agreements], the losses would be closer to seven percent”.
The WTO chief also warned that the impact of weakening multilateral trade would not be evenly distributed, with smaller and poorer economies likely to be particularly vulnerable.
However, she said stronger cooperation could produce significant economic benefits.
“In contrast, if members act purposefully to reinforce multilateral trade cooperation, safeguard what works, reform what doesn’t, it could boost global GDP by roughly three percent,” Okonjo-Iweala said.
Growing trade restrictions
The WTO remains a central institution in the rules-based global trading system, with about 72 per cent of global trade still operating under its rules.
However, the WTO’s chief economist, Robert Staiger, said the figure had fallen from 80 per cent two years earlier.
“At the same time, two years ago, that share stood at 80 percent,” Staiger told AFP, describing the decline as “disturbing”.
He said new tariffs and trade restrictions now cover 11 per cent of global imports, representing the highest level of coverage in more than 15 years.
“Another sign that global trade is coming under pressure is that new tariffs and trade restrictions now cover 11 percent of global imports, and that represents the highest coverage in over 15 years,” he said.
Despite the pressures, Staiger said global trade remained relatively resilient, partly because of the rapid expansion of artificial intelligence and demand for AI-related goods.
“We also need to acknowledge that some of the resilience may be reflecting AI and the AI boom and the fact that AI-enabling goods are extremely trade intensive,” he said.
He explained that the production of servers, computers, data centres and other AI-related infrastructure requires significant international trade and investment.
“There’s a lot of imports that go into producing AI enabling goods like servers and factories and computers and data centres, and that investment boom… may be masking some of the drop in world trade that might otherwise be occurring,” Staiger said.
He cautioned, however, that the benefits of AI-related trade were concentrated among a relatively small number of countries.
“AI trade tends to be relatively narrow in terms of the nations and the members that are enjoying that trade,” he said.
Staiger warned against relying solely on continued global trade growth as evidence that the international trading system remains healthy.
“Putting one’s eggs in the basket, [thinking] that everything is fine because world trade continues to grow at a nice clip, is a bit of a risky endeavour,” he said.
The WTO is expected to release an update to its global trade forecasts on October 8.
