The Director-General of the World Trade Organization, Ngozi Okonjo-Iweala, has said the ongoing trade dispute between the United States and China could cause a steep drop in the exchange of goods between the two countries—potentially reducing it by 80 percent. She shared this warning in a statement released on Wednesday.
The conflict intensified as US President Donald Trump increased tariffs on Chinese goods to 125 percent, sparking fears of economic instability across global markets. The world’s two largest economies have been locked in a tit-for-tat battle over import duties, with each side responding swiftly to the other’s moves.
“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,” said Okonjo-Iweala.
She also noted that both countries combined are responsible for three percent of global trade. A sharp reduction in their trade relationship, she said, could have a ripple effect that pulls down economic activity around the world.
Earlier in the day, Trump initially raised tariffs on Chinese products to 104 percent, but increased them again to 125 percent after China responded by raising tariffs on US goods to 84 percent. The president explained in a social media post that the sharp increase was aimed at holding China accountable. “China had been singled out for special treatment because of the lack of respect that China has shown to the World’s Markets,” he stated.
While the US took strong action against China, Trump gave the rest of the world a 90-day pause on new tariffs to allow time for negotiations. Dozens of countries have reportedly reached out to Washington to seek talks and avoid becoming caught in the trade war’s crossfire.
Okonjo-Iweala warned that if the situation is not handled carefully, it could lead to a dangerous split in the world economy. She expressed concern that the globe may divide into two major trade groups—one led by the US 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 urged all member countries of the WTO to come together and resolve the crisis through open conversation and cooperation.
