The Director-General of the World Trade Organization (WTO), Dr. Ngozi Okonjo-Iweala, has issued a serious warning about the long-term global economic risks posed by the ongoing tariff dispute between the United States and China. She said that if tensions continue along the current path, global real GDP could shrink by nearly 7%.
In a statement released on Wednesday, Dr. Okonjo-Iweala explained that the effects of the trade war will not be limited to the U.S. and China. Instead, the economic fallout could be global, with least developed countries (LDCs) suffering the most.
“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.
Dr. Okonjo-Iweala also warned that ongoing tariffs and trade barriers between the two major economies could result in an 80% drop in their bilateral trade, which would cause further global trade disruptions and instability.
“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%,” she noted.
She pointed out that U.S.-China trade accounts for about 3% of global trade. A breakdown in that relationship would have ripple effects across international supply chains, distorting markets and weakening global commerce.
“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,” she added.
Trade Diversion and the Need for Global Cooperation
The WTO also raised concern about trade diversion, where goods meant for one market are redirected to others, potentially harming local industries.
“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,” Dr. Okonjo-Iweala stated.
She emphasized that the global community must protect the open, rules-based international trading system — especially in the face of inflation, supply chain challenges, and weak economic growth.
“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 concluded.
Why This Matters
This warning from the WTO comes at a time when the global economy is still recovering from the effects of the COVID-19 pandemic and geopolitical instability.
For countries like Nigeria and other developing economies, the consequences of a prolonged U.S.-China tariff war could be severe. These may include fewer trade opportunities, lower foreign investment, and increased volatility in global commodity prices — all of which would slow down economic recovery and development.
