Director-General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, has cautioned nations against escalating tariff conflicts, warning that a retaliatory trade war could have "catastrophic" consequences for the global economy.

Speaking on Thursday at a panel discussion during the World Economic Forum in Davos, Switzerland, Mrs Okonjo-Iweala urged calm amidst rising tensions following threats of tariffs by US President Donald Trump against China, the European Union, Mexico and Canada.

"Please let's not hyperventilate. I know we are here to discuss tariffs. I've been saying to everybody: could we chill, also? I just sense a lot of hyperventilation," she said, emphasising the need for measured responses.

She drew parallels to the economic turmoil caused by the Smoot-Hawley Tariff Act of 1930 during the Great Depression which led to widespread retaliation and deepened the global crisis.

Okonjo-Iweala advised WTO member nations to explore alternative avenues for dispute resolution rather than resorting to retaliatory measures. "Even if a tariff is levied, please keep calm, don't wake up and without the necessary groundwork levy your own," she said.

The WTO chief warned that a full-scale trade war, with escalating tariffs of 25% to 60%, could result in double-digit global GDP losses.

"If we have tit-for-tat retaliation, whether it's 25 per cent tariffs, 60 per cent, and we go to where we were in the 1930s, we are going to see double-digit global GDP losses, double-digit. That's catastrophic," she said.