Source Credit : Portfolio Prints
The World Trade Organization (WTO) has issued a stark warning: the global trade system is facing its most severe disruption in more than 80 years, driven by escalating tariffs. Director-General Ngozi Okonjo-Iweala highlighted this vulnerability in a Reuters interview, noting that the share of global trade conducted under WTO-governed rules has plummeted from roughly 80% to just 72%.
“We're experiencing the largest disruption to global trade rules, unprecedented in the past 80 years,” Okonjo-Iweala stated
Breakdown of the Crisis
Tariffs and Trade Fragmentation
The recent surge in U.S. import tariffs—introduced under the Trump administration—has significantly eroded the WTO’s “Most Favored Nation” (MFN) principle, which mandates equal treatment for all members. The decline in MFN-based trade signals a fracturing of the multilateral trade framework.
Short-Lived Growth, Looming Downturn
While global trade saw a temporary boost earlier this year—propelling the WTO’s 2025 trade growth forecast from 0.2% to 0.9%—this was largely powered by frontloading of goods. Okonjo-Iweala warns that once these inventories are exhausted, the adverse impact of sustained tariffs could become pronounced in 2026.
Growing Uncertainty
"It's not surprising that some would question the global trading system... and predictability," the Director-General remarked, underscoring the system-wide concerns triggered by the erosion of predictability in trade norms.
Response and Reform
Calls for WTO Reform
The ongoing disruption has intensified calls for reform. Proposals aim to overhaul decision-making—from easing consensus requirements to enabling subsets of members to advance negotiations independently. The reforms target fairer industrial policies and aim to prevent stalemates driven by any single country’s veto ﹘ plans expected to gain traction ahead of the WTO’s March 2026 Ministerial Conference in Cameroon.
What the Future Might Hold
| Short-Term Outlook |
Medium to Long-Term Risks |
| Temporary growth fueled by pre-shipment |
Deepening deviation from MFN norms; further erosion of rules-based trade |
| Inventory buffers delay impact |
Lower predictability, fragmented trade blocs |
| Reform discussions underway |
Implementation and consensus gaps |
Bottom Line
The WTO describes the current situation as an unprecedented disruption—comparable to none in its 80-year history. With MFN-based trade slipping sharply, and inventory-fueled growth giving way to structural risks, the multilateral trading system stands at a crossroads. Reform efforts are underway, but time is ticking before the full impact of protectionist policies unfolds in 2026.
