World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala has warned that the ongoing trade war between the United States and China could severely impact the global economy, potentially reducing global GDP by up to 7%. This warning comes after US President Donald Trump raised tariffs on Chinese goods from 104% to 125% while suspending tariffs on several other nations. Okonjo-Iweala stressed the risks associated with the trade conflict, noting that the US and China together account for 3% of global trade.
The WTO chief highlighted that the escalating trade tensions could lead to a sharp contraction in bilateral trade between the two economic giants, with projections suggesting a reduction of up to 80%. This would not only hurt the US and China but also ripple out to other economies, particularly the least developed nations. Okonjo-Iweala emphasized that the effects of this trade war could have far-reaching consequences, including potentially leading to the fragmentation of global trade into two separate geopolitical blocs.
Okonjo-Iweala also warned that such a division of the global economy could result in a long-term reduction of real global GDP by nearly 7%. This, she noted, could destabilize the international economic system, harming global trade dynamics and economic growth prospects. The WTO director-general called for urgent, coordinated global efforts to address the issue, stressing the importance of preserving an open, rules-based international trading system.
In light of these risks, Okonjo-Iweala urged all WTO members to engage in dialogue and cooperation to prevent further escalation. She noted that the WTO remains a vital platform for such discussions, and that resolving these trade tensions within a cooperative framework is essential for the stability of the global economy. This call to action follows her earlier remarks in April, where she warned that US tariff measures would have significant consequences for global trade.
Source: Business day