World Trade Organization Director-General Ngozi Okonjo-Iweala has raised the alarm over the deepening US-China tariff war, warning it could slice global GDP by nearly seven percent if left unchecked.
Speaking in a statement on Wednesday, April 9, Okonjo-Iweala said the escalating trade fight between the two largest economies poses a major threat to the stability of global trade and economic growth.
“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,” she said.
According to her, the United States and China, who together account for about three percent of global trade, are now dragging the world toward economic instability.
Okonjo-Iweala warned that if the global economy fractures into rival blocs aligned with Washington or Beijing, the long-term effects could be devastating.
“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.
The warning came hours after US President Donald Trump raised tariffs on Chinese imports to 125 percent in retaliation for Beijing’s move to hike duties on US goods to 84 percent. Trump had earlier raised tariffs to 104 percent before the latest escalation.
Defending the decision in a social media post, Trump said, “the lack of respect that China has shown to the World’s Markets” justified the sharp hike.
Despite his hardline stance, Trump announced a 90-day pause on new tariffs against other countries following widespread appeals for dialogue.
Okonjo-Iweala urged world leaders to act swiftly and collectively to protect the global economy from further harm.
“It is critical for the global community to work together to preserve the openness of the international trading system,” she said.
“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.”
US stock markets, which had lost around 10 percent over the past week due to the escalating dispute, recovered slightly following Trump’s announcement of a pause.