WTO chief alerts US-China tariff war can reduce trade between two economic powerhouse by 80 percent

“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," Ngozi Okonjo-Iweala, Director-General, WTO, said in a statement.

She alerted that the decrease in trade between the two largest economies in the world could severely damage the global economic outlook.

"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," the WTO chief said.

She said: "Our assessments, informed by the latest developments, highlight the substantial risks associated with further escalation."

Two Blocs

She said the world economy is facing the potential risk of breaking into two blocs centred around the USA and China.

"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 percent," she said.

She said it is critical for the global community to work together to preserve the openness of the international trading system.

Donald Trump Announces 90-Day Pause On Tariffs

Amid a trade war with China, US President Donald Trump on Wednesday announced a 90-day hold on tariffs for all other countries except Beijing.

After the US raised tariffs on China to 104 percent, Beijing retaliated, announcing that it would impose a levy of 84 percent on US imports, up from 34 percent, marking a significant escalation of the tariff trade war between the countries. 

The US counter-strike was swift, with Trump announcing that he was raising tariffs on China even further- to 125 percent - effective immediately.

"At some point, hopefully in the near future, China will realise that the days of ripping off the USA, and other countries, is no longer sustainable or acceptable," he posted on Truth Social.

For other countries, though, the billionaire also appeared to apply a salve on tariff wounds, announcing a 90-day pause on tariffs over the baseline, universal rate of 10 percent.

China implemented the move just hours after the USA officially imposed a massive 104 per cent tariff on Chinese imports.

The Chinese tariff declaration will further escalate the trade tension sparked by US President Donald Trump.