By John Ogunsemore
The Director General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala has warned that merchandise trade between the United States and China could decrease by 80 percent if the current tariff war between both nations persists.
Okonjo-Iweala stated this in a statement published on the WTO website on Wednesday.
US President Donald Trump announced he would raise tariffs on China to 125 percent, while pausing same for the rest of the world by 90 days.
China, which labelled the US action “a mistake on top of a mistake”, has retaliated with 84 percent tariffs, effective April 10.
Okonjo-Iweala said, “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%.
“This tit-for-tat approach between the world’s two largest economies — whose bilateral trade accounts for roughly 3% of global trade — carries wider implications that could severely damage the global economic outlook. Our assessments, informed by the latest developments, highlight the substantial risks associated with further escalation.”
She maintained that negative macroeconomic effects will not be confined to the United States and China but will extend to other economies, especially the least developed nations.
Okonjo-Iweala further warned that the tariff war could cause fragmentation of global trade along geopolitical lines, stressing that division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly 7 percent.
The WTO DG noted that trade diversion remains an immediate and pressing threat which requires a coordinated global response.
“We urge all WTO members to address this challenge through cooperation and dialogue.
“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,” she stated.