World Trade Organization (WTO) Director-General Dr. Ngozi Okonjo-Iweala has warned that escalating trade tensions between the United States and China could trigger a dramatic collapse in global trade, potentially reducing bilateral merchandise trade between the two economic superpowers by up to 80%.
Speaking on Wednesday, Okonjo-Iweala highlighted preliminary WTO projections suggesting that continued tit-for-tat trade measures could unleash widespread economic disruption. “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,” she said.
The WTO’s assessment emphasises that the fallout would not be confined to the U.S. and China. Developing countries, which often rely heavily on stable and open trade systems, could be among the hardest hit. Okonjo-Iweala cautioned that the ripple effects could extend far beyond bilateral trade, potentially dragging the global economy into a prolonged downturn.
The trade relationship between the U.S. and China currently accounts for around 3% of total global trade. A breakdown in this relationship, she warned, could lead to a broader fragmentation of the international trading system along geopolitical lines—causing real global GDP to shrink by nearly 7%.
Okonjo-Iweala also drew attention to the growing trend of trade diversion, where countries reroute their trade flows to avoid direct exposure to the conflict. While this may offer temporary relief, she noted, it could result in long-term economic isolation for less developed countries that depend on a stable, rules-based trade environment for growth and survival.
Calling for urgent and collective international action, she stated: “It is critical that the global community works together to preserve the openness of the international trading system. 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.”
The warning comes amid rising concern that escalating protectionism could undermine global economic recovery efforts and destabilize international markets for years to come.
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