(Reuters) - The Director-General of the World Trade Organization said new tariffs announced by the U.S. along with those introduced at the start of the year could lead to a contraction of around 1% in global merchandise trade volumes in 2025.

"I'm deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade," Ngozi Okonjo-Iweala said in a statement on Thursday.

She warned that the tariffs have the potential to create significant trade diversion effects.

The WTO administers 74% of global trade, down from around 80% at the beginning of the year due to recent tariffs, according to the organisation.

World leaders have warned of the potential negative economic consequences of the tariffs.

"President Trump's announcement of universal tariffs on the whole world, including the EU, is a major blow to the world economy," European Commission President Ursula Von Der Leyen said.

Okonjo-Iweala told member states earlier on Thursday in a letter seen by Reuters that the WTO had received many questions about the tariffs.

"Many of you have been in touch about the U.S. announcement on tariffs, asking for the Secretariat to provide an economic analysis of the impact of these tariffs and any potential reaction on your trade," Okonjo-Iweala wrote.

Observers say U.S. determination to double down on tariffs risks sidelining the Geneva-based WTO and its free-trade mandate.