The Director-General of the World Trade Organisation (WTO) warned on Wednesday that the ongoing tariff war between the United States and China could slash goods trade between the two economic powerhouses by up to 80 percent, with serious ripple effects on the global economy.
In a major escalation, President Donald Trump raised tariffs on Chinese goods to 125 percent on Wednesday, as both nations continued to exchange retaliatory trade measures.
“The escalating trade tensions between the United States and China pose a significant risk of a sharp contraction in bilateral trade. Our preliminary projections suggest that merchandise trade between these two economies could decrease by as much as 80 percent,” WTO director general Ngozi Okonjo-Iweala said in a statement.
She said the United States and China together accounted for three per cent of world trade and warned that the conflict could “severely damage the global economic outlook”.
While imposing additional tariffs on China, President Trump granted a 90-day pause on higher tariffs for other countries following outreach from dozens of nations seeking negotiations.
WTO Director-General, Ngozi Okonjo-Iweala, cautioned that the global economy faces the danger of splitting into two major blocs—one aligned with the United States and the other with China.
“Of particular concern is the potential fragmentation of global trade along geopolitical lines. A division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly seven percent,” she said.
She urged all WTO members “to address this challenge through cooperation and dialogue”.
“It is critical for the global community to work together to preserve the openness of the international trading system,” said Okonjo-Iweala.
“WTO members have agency to protect the open, rules-based trading system. The WTO serves as a vital platform for dialogue. Resolving these issues within a cooperative framework is essential.”
Hours earlier, Trump ramped up duties on Chinese goods to 104 percent, only to hike them further when China retaliated by raising tariffs on US imports to 84 percent.
In a social media post announcing the moves, Trump said China had been singled out for special treatment because of “the lack of respect that China has shown to the World’s Markets”.
U.S. stock markets had dropped by roughly 10 percent over the past week amid rising trade tensions, but they rebounded sharply following President Trump’s announcement of a temporary pause on further tariffs.
