Geneva - The World Trade Organization (WTO) has issued a stark warning, indicating that the escalating trade conflict between the United States and China could lead to a dramatic 80% collapse in merchandise trade between the two nations. WTO Director-General Ngozi Okonjo-Iweala delivered this grim assessment on Wednesday, local time, as the trade war intensifies following recent tariff hikes by the US and retaliatory measures from China.   

Okonjo-Iweala, in an official statement, revealed that preliminary WTO analysis suggests a potential "up to 80% reduction in merchandise trade" between the US and China due to increasing trade friction. She further cautioned that a fragmentation of the global economy into two distinct blocs could trigger a long-term decline of approximately 7% in global real GDP, expressing significant concern over such a scenario.

This warning comes on the heels of US President Donald Trump's announcement of a 10% tariff on all imports, excluding China, coupled with a substantial increase in tariffs on Chinese goods from 104% to 125%. President Trump defended these actions by labeling China's 84% retaliatory tariffs as "disrespectful."

Earlier, China had lodged a formal complaint with the WTO in response to the new US tariff impositions, signaling a strong condemnation of the measures.   

Director-General Okonjo-Iweala stressed that the detrimental effects of this trade dispute would not be confined to the US and China alone but would extend to other nations, particularly developing economies. She highlighted the "very concerning" prospect of global trade fracturing along geopolitical lines, emphasizing the "immediate" danger of trade flow realignments and the urgent need for a "global and coordinated response."

In a seemingly contrasting move, President Trump announced a 90-day reprieve on the "reciprocal tariffs" via his social media platform. However, this suspension excludes Chinese goods, indicating that the fundamental trade tensions between the two economic powerhouses are expected to persist.   

Experts have voiced concerns that a prolonged US-China trade war could precipitate a reshaping of global supply chains, a slowdown in global economic growth, and heightened inflationary pressures. The WTO's recent warning amplifies these anxieties, underscoring the critical need for international cooperation and concerted efforts to resolve the escalating conflict.

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