Dr. Ngozi Okonjo-Iweala, Director-General of the World Trade Organization (WTO), has issued a stark warning regarding the escalating trade tensions between the United States and China, emphasizing the significant risks these tensions pose to global trade. According to Dr. Okonjo-Iweala, preliminary projections indicate that merchandise trade between the two economic giants could decline by as much as 80%.
“We are closely monitoring the situation, and our early assessments suggest a sharp contraction in bilateral trade between these two critical economies,” said Dr. Okonjo-Iweala. “Such a dramatic reduction would have profound implications, not only for the United States and China but for the global economy as a whole.”
She highlighted the dangerous pattern of retaliatory actions between the world’s two largest economies, which together represent around 3% of global trade. This ongoing “tit-for-tat” approach risks further destabilizing the global economic landscape, with potential consequences far beyond the immediate trade dispute.
Dr. Okonjo-Iweala warned that the economic fallout would extend well beyond the U.S. and China, disproportionately affecting smaller and less developed economies. One of the most troubling scenarios, she noted, is the potential fragmentation of the global trading system along geopolitical lines, which could reduce global real GDP by up to 7% in the long term.
“The economic consequences of these tensions are not confined to the two largest economies,” she stressed. “If the situation continues to escalate, the global economy could suffer from significant disruptions. Least developed countries, in particular, could bear the brunt of these effects.”
Moreover, trade diversion remains an immediate threat, potentially diverting trade flows in ways that could undermine global stability. To mitigate these risks, Dr. Okonjo-Iweala called for a coordinated global response, urging all WTO members to engage in dialogue and work together to address the growing crisis.
She concluded by underscoring the importance of preserving the open, rules-based international trading system. “The WTO remains a crucial platform for dialogue, and it is essential that we resolve these challenges cooperatively to maintain the stability and openness of global trade,” she said. “Now more than ever, the world must work together to ensure the continued functioning of the global trading system.”
