The World Trade Organization (WTO), the world’s multilateral regulatory trade body, projected that the escalating trade tensions between the United States and China could decrease bilateral merchandize trade by a whopping 80 percent and poses wider implications that could severely damage the global economic outlook, with severe impact on
“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 Dr. Ngozi Okonjo-Iweala, Director-General of the WTO, said in a statement on April 9, 2025.
Okonjo-Iweala noted of the far-reaching implication of the trade war because the two world’s largest economies account for roughly 3 percent of global trade. “Our assessments, informed by the latest developments, highlight the substantial risks associated with further escalation,” the WTO chief said.
The negative macroeconomic effects will not be confined to the United States and China but will extend to other economies, especially the least developed nations.
Of particular concern, the WTO said, 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 7 percent.
Moreover, trade diversion remains an immediate and pressing threat, one that requires a coordinated global response. We urge all WTO members to address this challenge through cooperation and dialogue.
Hence, WTO said that it is critical for the global community to work together to preserve the openness of the international trading system. “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,” the statement concluded.
