World Trade Organization warns that splitting global trade along geopolitical lines could reduce world gross domestic product by 5.1%, while complete breakdown would cost 6.9%, official figures show.

The World Trade Organization (WTO) warned on Tuesday that the geopolitical fragmentation of the global trading system into aligned blocs could shrink global gross domestic product (GDP) by 5.1% and reduce global exports by 18.6%.

In an even worse scenario, a total breakdown of multilateral cooperation that replaces the WTO with an unstructured network of bilateral free trade agreements would reduce global GDP by 6.9% and cut global exports by 26.9%.

Conversely, reinforcing multilateral trade cooperation could boost global output by 2.9% and expand global exports by 17.9%, the report showed.

WTO Director-General Ngozi Okonjo-Iweala stressed that global trade faces its most severe period of disruption in 80 years as non-discriminatory rules come under increasing strain.

Okonjo-Iweala noted that around 72% of global merchandise trade still operates under most-favored-nation tariff terms, down from roughly 80% in 2022.

The report emphasized that integration into the multilateral trading system has helped expand trade between members by 140% since 1995 and driven faster economic growth across low- and middle-income economies.

However, gains remain unevenly distributed, with least-developed countries accounting for less than 1% of world trade and facing trade costs in manufacturing and services that exceed those of high-income economies by 50%.

Looking ahead, the report projected that artificial intelligence could increase global trade by 40% by 2040 and add more than 13% to world GDP over the next 15 years, particularly driving growth in digitally deliverable services.