“I hope we don’t see a return to the protectionism of the 1930s.”

Global trade is “not in the best shape at the moment.”

This is acknowledged by Dr Ngozi Okonjo-Iweala, Director-General of the World Trade Organisation (WTO): “Protectionism is on the rise, some of the WTO rules are being eroded, and some of this is leading to fragmentation,” she told the BBC.

“We are concerned about global trade because it is the lifeblood of countries’ resilience and underpins growth.”

Those divisions have come to the fore in recent weeks and months, with the EU imposing temporary tariffs of up to 37.4% on imports of Chinese-made electric vehicles (EVs), following the US imposing 100% tariffs on Chinese-made EVs in May.

Both Brussels and Washington accuse the Chinese government of unfairly subsidizing the electric vehicle sector and allowing manufacturers to export cars at unfairly low prices, threatening jobs in Western countries.

Biden also increased import taxes on a range of other Chinese products that he said form the “industries of the future,” including electric vehicle batteries and the minerals they contain, cells needed to make solar panels, and computer chips.

Meanwhile, the US is pumping billions of dollars of government funding into green technology through the Anti-Inflation Act, aimed at reducing reliance on imports from China.

EU Trade Commissioner Valdis Dombrovskis told the BBC that Europe had no intention of closing off the EV market: “We welcome imports, we welcome competition, but this competition has to be fair,” he said.

Global trade volumes fell last year for the third time in the past 30 years, the WTO said, blaming the 1.2 percent drop on rising inflation and interest rates, which it expects to recover this year.

But these factors are rooted in events that continue to fundamentally reshape the global economy, explained Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), in a recent speech.

“The last few years, particularly when it comes to global trade relations, have been nothing like we’ve seen since the end of the Cold War.”

“We’ve seen a lot of shocks over the last few years, including the pandemic and Russia’s aggression in Ukraine, and these events have caused countries around the world to increasingly prioritize economic security and national security concerns when deciding who to trade with and who to invest in,” she said.

This is also affecting countries as far away as Peru, Ghana and Vietnam, which are now being forced to choose between strengthening economic ties with the West or building a China-Russia axis.

“We are also concerned by the emergence of fragmentation in the trade data,” said the WTO’s Dr Okonjo-Iweala, “which shows trade between like-minded blocs growing faster than trade between such blocs.”

She warns that continuing on this path “will be costly for the world” – a WTO study estimates the cost at 5% of the global economy, but the IMF suggests it could be closer to 7%, or $7.4tn (£5.8tn) in lost output in the long term.

The EU’s imposition of tariffs on Chinese-made EVs comes after exports to Europe have surged in recent years, jumping from $1.6 billion in 2020 to $11.5 billion last year, and now accounting for 37% of all EV imports into the EU, according to one study.

BYD, Geely and SAIC are some of the Chinese EV makers that are said to have benefited from billions of dollars worth of government support.

Jens Eskelund, president of the China-European Union Chamber of Commerce, said after years of support, Chinese EV companies no longer need it. “They’re very competitive on their own terms now. I think the imposition of tariffs is a sign that something’s out of balance.”

Looking at the broader relationship, Eskelund said it was “alarming” that the volume of goods the EU sold to China has fallen by about a third since 2017, despite the Chinese economy growing steadily.

He cited China’s restrictions on market access for foreign companies and strict security regulations, adding: “It is fair to say that Europe remains a much more open market for Chinese companies and vice versa. This clearly needs to change.”

A recent survey by the chamber showed members’ confidence in investing in China is at an all-time low.

This comes as the EU seeks to reduce its economic reliance on China, with European Commission President Ursula von der Leyen saying last year that ties with China needed to be “de-risked, not de-coupled.”

Brussels’ concerns include Beijing’s use of sensitive technology for military purposes and its support for Russia’s ongoing offensive in Ukraine.

Companies such as IKEA, Nike and Apple are also trying to reduce their reliance on China.

The EU and China are due to hold talks about possible tariffs on EVs, while Chinese state media have reported that retaliatory measures against EU products including pork, cognac and luxury cars are under consideration.

But there are other barriers that global trade must overcome, including two of the most important arteries for transporting goods around the world.

This year, the Panama Canal Authority has had to reduce the number of ships allowed through the canal because there hasn’t been enough rainfall to fill the lakes that feed the canal.

Meanwhile, the Suez Canal is effectively blocked due to ongoing attacks on commercial ships by Houthi rebels in the Red Sea, with traffic through the canal falling by 90%, according to logistics company Kuehne + Nagel.

Rolf Habben Janssen, chief executive of German shipping giant Hapag-Lloyd, said the disruption had caused his company’s rates to rise by 30-40 percent.

While delivery costs are a small part of the retail price, Habben Janssen said, “these additional costs end up being passed on to the consumer,” potentially pushing up inflation at a time when central banks have shown signs of trying to rein it in.

That would be “harmful to consumers”, says the WTO’s Dr Okonjo-Iweala.

She said despite all the tensions, trade was showing signs of recovery, adding that her organization could help countries resolve their differences.

Meanwhile, Dr Okonjo-Iweala acknowledges that some of the WTO rules need to be changed to meet the challenges of climate change. [global trade] There are rules, but we need to revisit them,” she says.

“When these regulations were put in place decades ago, we weren’t facing the same climate change threats we face today.”

Regarding the increased use of tariffs, she added, “I hope we don’t see a repeat of what we saw in the 1930s, where there were retaliatory tariffs, and it just got worse from there, and everybody lost.”

“So hopefully we don’t get into those times again.”