The head of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, has warned that the trade war between the United States and China could cut goods trade between the two countries by 80%. She said this could also hurt the rest of the world’s economy.
“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.
On Wednesday, U.S. President Donald Trump increased tariffs on Chinese goods to 125%. This happened after China raised its own tariffs on U.S. imports to 84%.
Even though Trump raised tariffs on China, he delayed higher tariffs on other countries for 90 days. This delay came after many countries asked for talks.
Okonjo-Iweala said the U.S. and China make up about 3% of world trade. If their conflict continues, it could seriously hurt the global economy. She also warned that the world could split into two economic groups—one led by the U.S. and the other by 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 asked all WTO members to work together and solve the issue through talks, not trade battles.
“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.”
Earlier in the day, Trump had raised tariffs on Chinese products to 104%. But after China responded with its own tariffs, he pushed U.S. tariffs even higher.
Trump said on social media that China was being treated differently because it had not shown respect to global markets.
U.S. stock markets had fallen by 10% in the past week due to these trade tensions. However, they went up again after Trump announced a temporary pause in tariffs on other countries.
