The World Trade Organization (WTO) has raised serious concerns about the intensifying trade dispute between the United States and China, warning that a further escalation could trigger a dramatic contraction in bilateral trade and pose broader risks to the global economy.
Preliminary WTO projections indicate that merchandise trade between the two largest global economies could fall by as much as 80% if current tensions persist. With U.S.-China trade accounting for approximately 3% of global trade, the ripple effects of such a decline would extend well beyond their borders.
“This tit-for-tat approach presents a significant threat to the stability of the global trading system,” the WTO said. “The consequences of continued escalation could be both severe and far-reaching.”
The WTO’s latest assessment highlights the possibility of global economic fragmentation, as trade increasingly aligns along geopolitical lines. In such a scenario, the global economy could see a long-term decline in real GDP by up to 7%, disproportionately affecting the world’s poorest nations.
Trade diversion—where trade shifts away from traditional partners due to tariffs or restrictions—also poses an immediate concern. The WTO has called for a coordinated international response, emphasizing the need for collaboration and open dialogue among member states.
“The negative macroeconomic effects will not be confined to the U.S. and China. Developing and least-developed countries stand to suffer the most,” the statement continued. “A divided global economy is in no one’s interest.”
The WTO reiterated its commitment to a rules-based multilateral trading system and urged all members to leverage the organization as a platform for resolving disputes and promoting cooperative solutions.
“It is critical for the global community to come together to preserve the openness of international trade. WTO members have the agency and responsibility to uphold the principles of a transparent and predictable trading system,” the organization affirmed.
