Miguel Hadchity
RIYADH: A full-blown trade war between the US and China could divide the global economy into rival blocs and slash worldwide growth by 7 percent in the long term, the World Trade Organization said.
WTO Director-General Ngozi Okonjo-Iweala stated that bilateral trade between the world’s two largest economies could plummet by as much as 80 percent, with far-reaching consequences.
Okonjo-Iweala said: “This tit-for-tat approach between the world’s two largest economies — whose bilateral trade accounts for roughly 3 percent of global trade — carries wider implications that could severely damage the global economic outlook.”
She added: “A division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly 7 percent.”
Developing nations, particularly least-developed countries, would bear the brunt of the fallout.
“Trade diversion remains an immediate and pressing threat, one that requires a coordinated global response,” Okonjo-Iweala emphasized, urging WTO members to resolve disputes through dialogue.
The policy shift, first announced on April 2 and revised on April 10, signals a sharp escalation in trade tensions and a renewed push for Trump’s “America First” agenda.
“In many cases, the friend is worse than the foe in terms of trade,” Trump said at a White House briefing on April 2, criticizing allies like Mexico and Canada for what he called unfair trade practices.
He later suspended most of the tariffs on Wednesday, reverting to a universal 10 percent rate — except for China, which now faces 125 percent tariffs, up from 104 percent. “Based on the lack of respect China has shown to the World’s Markets, I am hereby raising the Tariff charged to China to 125 percent,” Trump wrote on Truth Social.
The announcement triggered a historic stock market rally, with the Dow surging 7.87 percent, its best performance in five years, while the S&P 500 and Nasdaq jumped 9.5 percent and 12.2 percent, respectively.
The WTO has repeatedly cautioned against unilateral trade measures, stressing that a rules-based trading system is critical to global stability. With China vowing retaliation, the risk of further escalation looms — a scenario Okonjo-Iweala warns could derail the fragile post-pandemic recovery.
“WTO members have agency to protect the open, rules-based trading system,” she said. “Resolving these issues within a cooperative framework is essential.”
