US-China trade war could lead to contraction of global GDP by 7% – WTO

Director-General, World Trade Organization WTO, Dr. Ngozi Okonjo-Iweala has said that the U.S.- China trade war could lead to contraction of global GDP by 7%. Okonjo-Iweala made the observation in a statement saying the consequences of the trade tensions could extend far beyond the two countries, with least developed countries (LDCs) among the hardest hit. “The negative macroeconomic effects will not be confined to the United States and China, but will extend to other economies, especially the least developed nations. “Of particular concern is the potential fragmentation of global trade along geopolitical lines.
“A division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly 7%,” she said. Okonjo-Iweala said the escalation of the trade war could also lead to 80% collapse in bilateral merchandise trade and trigger global trade disruptions and economic instability. 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.
“Moreover, trade diversion remains an immediate and pressing threat, one that 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 said.