The World Trade Organization (WTO) warned on Wednesday that the ongoing tariff dispute between the United States and China could reduce bilateral trade in goods by as much as 80%, with the potential to severely harm the global economy.
In a statement, WTO Director-General Ngozi Okonjo-Iweala emphasized that the escalating tensions between the two economic powerhouses posed a significant risk to global trade. “Our preliminary projections suggest that merchandise trade between the United States and China could decrease by as much as 80 percent,” she said, highlighting the serious implications of the trade standoff.
The United States and China, together, account for about 30% of global trade. Okonjo-Iweala warned that continued trade hostilities could deeply damage the global economic outlook, with ripple effects impacting nations beyond just the U.S. and China.
On the same day, U.S. President Donald Trump raised tariffs on Chinese goods to 125% as part of an ongoing battle over retaliatory trade levies. Despite escalating tariffs on China, Trump announced a 90-day delay in imposing further tariffs on other countries, following outreach from various nations for trade negotiations.
Okonjo-Iweala also expressed concern about the growing divide between the U.S. and China, suggesting that global trade could split into two distinct blocs, one led by the U.S. and the other by China. She warned that such fragmentation could reduce global real GDP by nearly 7% over the long term, urging cooperation and dialogue among WTO members to address the challenge.
“The potential division of the global economy into two blocs is particularly troubling,” she said, emphasizing the importance of preserving a unified, open international trading system.
Earlier in the day, Trump escalated tariffs on Chinese imports to 104%, with China retaliating by raising duties on U.S. goods to 84%. In a social media post, Trump claimed that China had been singled out for its lack of respect for global markets, adding fuel to the already tense situation.
While U.S. stock markets had seen a significant slump of around 10% over the past week amid rising trade tensions, they rebounded strongly after Trump’s announcement of the tariff pause.
