WTO Chief Okonjo-Iweala Warns: Tariff War Could Slash US-China Goods Trade by 80%

U.S. President Donald Trump on Wednesday increased tariffs on Chinese goods to 125 percent, escalating tensions in the ongoing trade dispute between the world’s two largest economies.

The head of the World Trade Organization warned that the intensifying tariff war could slash trade in goods between the U.S. and China by as much as 80 percent, with potentially damaging ripple effects across the global economy.

“The escalating trade tensions between the United States and China pose a significant risk of a sharp contraction in bilateral trade. Our preliminary projections suggest that merchandise trade between these two economies could decrease by as much as 80 percent,” WTO director general Ngozi Okonjo-Iweala said in a statement.

She noted that the United States and China together account for about three percent of global trade and cautioned that their escalating conflict could “severely damage the global economic outlook.”

While President Trump imposed additional tariffs on Chinese goods, he announced a 90-day pause on new tariffs for other countries, citing ongoing negotiations initiated by dozens of nations.

WTO Director-General Ngozi Okonjo-Iweala also warned of a looming risk that the global economy could fracture into two opposing blocs—one aligned with the U.S., and the other with China.

“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 seven percent,” she said.

She urged 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,” said Okonjo-Iweala. “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.”

Earlier in the day, Trump increased tariffs on Chinese goods to 104 percent, only to raise them further after China retaliated with an 84 percent tariff on U.S. imports.

In a social media post announcing the measures, Trump stated that China was being targeted due to “the lack of respect that China has shown to the World’s Markets.”

Despite a 10 percent drop in U.S. stock markets over the past week amid rising trade tensions, stocks surged following Trump’s announcement of the 90-day tariff pause.