U.S. President Donald Trump raised tariffs in China to 125% on Wednesday as the world’s largest economy retaliated against tax collections.
The head of the World Trade Organization said the U.S.-China tariff war could reduce commodity trade between the two economic giants by 80%, thereby reducing the rest of the world economy.
“Trade tensions between the United States and China pose a significant risk of a sharp contraction of bilateral trade. Our preliminary forecasts suggest that commodity trade between the two economies could be reduced by as much as 80%.”
She said the United States and China account for one-third of world trade and warned that the conflict could “seriously damage the global economic outlook.”
Even if he charged further tariffs on China, he stopped higher tariffs in the rest of the world for 90 days after dozens of countries reached out to negotiate.
Okonjo-Iweala warned that the world economy has the potential to break into two groups, one concentrated in the United States and the other China.
“There is particular concern about the potential split of global trade along the geopolitical line. The global economy being divided into two groups could lead to a long-term reduction of global real GDP by nearly 7%.”
She urged all WTO members to “solve this challenge through cooperation and dialogue”.
“It is crucial for global communities to keep the international trading system open,” Okonjo-Iweala said. “WTO members have agencies that protect open rules-based trading systems. The WTO is an important platform for dialogue. It is crucial to address these issues within the framework of cooperation.”
A few hours ago, Trump raised tariffs on Chinese goods to 104%, just to hike further when China raises tariffs on U.S. imports to 84%.
In a social media post announcing the move, Trump said China was picked out for its special treatment for “lack of respect China shows for the world market.”
U.S. stock markets have fallen about 10% in the past week as trade tensions escalate, but they surged after Trump announced a pause.
