US-China trade war risks 80% drop in global trade – WTO warns

By Kazeem Ugbodaga

In a stark warning to global leaders, Dr. Ngozi Okonjo-Iweala, the Director-General of the World Trade Organization (WTO), has raised the alarm over the escalating trade conflict between the United States and China.

She cautioned that the situation could precipitate a catastrophic collapse in international trade and severely disrupt the global economy.

In a statement issued on Wednesday, Okonjo-Iweala revealed preliminary projections indicating that merchandise trade between the two largest global economies could plummet by as much as 80%, a staggering figure that would send shockwaves throughout the international market.

The WTO’s latest assessments suggest that the ongoing tit-for-tat trade policies are poised to have far-reaching consequences not just for the U.S. and China, but for nations across the world, particularly the most vulnerable.

“The escalating trade tensions between the United States and China pose a significant risk of a sharp contraction in bilateral trade. This situation is dire and could have lasting repercussions on global economic stability,” Okonjo-Iweala stated.

“Our projections suggest that the effects could extend far beyond the U.S. and China, disproportionately impacting developing nations and potentially sending the global economy into a tailspin.”

With the U.S. and China’s bilateral trade representing approximately 3% of global trade, the WTO Director-General warned that the breakdown of this crucial economic relationship could fracture the international trading system, leading to a dangerous geopolitical divide.

Okonjo-Iweala highlighted that a possible fragmentation of global trade along these newly drawn geopolitical lines could shrink global real GDP by nearly 7%, with long-lasting economic fallout that could devastate global recovery efforts.

As the situation continues to escalate, Okonjo-Iweala stressed the immediate threat posed by trade diversion – the shifting of trade flows as nations seek to minimize the fallout from U.S.-China tensions.

However, she emphasized that without coordinated action from the international community, this shifting landscape could lead to severe economic isolation for many countries, particularly the least developed nations that depend on open, rules-based trading for their survival.

“It is critical that the global community works together to preserve the openness of the international trading system,” she urged.

“The WTO stands as a platform for dialogue, and it is within the power of all WTO members to ensure the stability of the global economy. We must resolve this issue within a framework of cooperation to prevent further damage.”