Ngozi Okonjo-Iweala, Director-General of the World Trade Organization (WTO), warned that the escalating trade tensions between the US and China could seriously damage the global economy. Okonjo-Iweala stated that trade in goods between the two countries could shrink by up to 80%, which could lead to a reduction in global real Gross Domestic Product (GDP) of about 7% in the long term.
In a written statement, the WTO Director-General emphasized that the trade war, which reignited with the US raising tariffs on Chinese products, threatens not only the countries involved but also global economic stability.
“Trade between the two economies could fall by 80%”
Assessing the risks to global trade from the “tit-for-tat” approach between the world's two largest economies, Okonjo-Iweala stated, “According to our preliminary estimates, trade in goods between these two economies could fall by up to 80%.”
Stating that this negative picture will affect many economies, especially less developed countries, Okonjo-Iweala added, “The potential for global trade to fragment along geopolitical lines is particularly worrying.”
“Global cooperation is critical”
The WTO Director-General stated that the long-term effects of the world economy splitting into two major blocs could mean a loss of close to 7% in global GDP. “We call on all WTO members to address this challenge through cooperation and dialogue,” Okonjo-Iweala stated, adding that trade diversion requires an urgent and coordinated global response.
Stating that maintaining the openness and functioning of the international trading system is a shared responsibility of the global community, Okonjo-Iweala emphasized that the WTO is obliged to protect the open, rules-based trading order and provides a vital platform for dialogue.
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