Are bilateral tariffs from US undermining global trade fairness? WTO chief sounds alarm

The director-general of the World Trade Organisation (WTO), Ngozi Okonjo-Iweala, has issued a warning that bilateral tariff agreements between the United States and other countries risk undermining a fundamental principle of global trade equality.

Speaking in an interview with the Financial Times following her visit to Tokyo, Okonjo-Iweala described the current state of global trade as being in “crisis,” despite a recent easing of tensions in the tariff dispute between the US and China, Caliber.Az reports.

Japanese officials have privately expressed concern that the recently concluded US-UK trade agreement, negotiated hastily and finalised this month, might encourage other nations to pursue similar bilateral deals. Such agreements could prioritise expediency over established multilateral rules and challenge the WTO’s core “most favoured nation” (MFN) principle, which requires countries to treat all trading partners equally unless a comprehensive bilateral deal is in place.

When asked about the potential damage that a growing trend of such bilateral agreements could inflict on the MFN principle, Okonjo-Iweala confirmed the risk, emphasising that WTO members engaging in these negotiations should strive to keep their deals consistent with WTO rules. She pointed out that despite recent disputes, about 74% of global goods trade still operates under MFN terms.

The MFN principle mandates that countries offer the same tariff rates to all WTO members unless a bilateral agreement covers “substantially all trade,” a condition that the US-UK pact does not meet. Okonjo-Iweala highlighted this shortcoming as a significant concern.

Although the recent US-China tariff conflict has de-escalated following a weekend agreement on a tariff truce, the earlier imposition of tit-for-tat tariffs exceeding 100% has left lasting consequences on the global economy. Okonjo-Iweala warned that such actions risk causing a fragmentation of the global trading system if countries begin to align with one side or another. This fragmentation could result in a 7% decline in real global GDP over the long term — a far greater economic impact than that seen during the 2008-2009 financial crisis.

She further urged the WTO to recognise that significant disruptive forces have shaken world trade and that the organisation must investigate the underlying causes, including the reasons behind the US’s trade policies and what changes are necessary within the trading system. “We must not waste this crisis,” Okonjo-Iweala said.

One positive outcome she noted was that the crisis has prompted WTO members to reaffirm their appreciation for the multilateral trading system, which many had previously taken for granted. She compared it to air—something essential yet often unnoticed until its absence is felt. Now, members have come to value the system more deeply as a result of recent challenges.

By Tamilla Hasanova