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The US-China trade war risks dragging the world into recession, the head of the WTO has warned, with global output set to drop 7 per cent if the two economic powerhouses decouple fully.
Ngozi Okonjo-Iweala told the Financial Times that President Donald Trump’s tariffs and Chinese retaliatory moves could split the world into two trading blocks and “force countries to choose to be with one side or the other”.
“We’re very concerned that we’re seeing a potential decoupling of US/China trade — we really want to avoid a case of geopolitical fragmentation,” the WTO director-general said.
“That will lower global real GDP by 7 per cent in the long term,” she added.
Okonjo-Iweala said the US had in effect cut off all imports from China with its “reciprocal tariffs”, even as it temporarily exempted items such as smartphones and electronic equipment.
Trump’s tariffs — currently at a base rate of 10 per cent on all imports — will also hurt North American trade with the rest of the world, the WTO said in a forecast published on Wednesday.
Canada, the US and Mexico will be the only countries where both exports and import volumes will drop, if the US president’s tariffs are maintained at 10 per cent.
Trump has exempted many Mexican and Canadian products from his protectionist measures, as the US has a trade agreement with its neighbours, increasingly isolating the so-called USMCA bloc from the global economy.
Overall USMCA exports will drop 12.6 per cent while their imports are expected to fall 9.6 per cent in 2025, the WTO said. This compares to previous projections of more than 2 per cent growth in both trade categories before Trump’s tariff announcements.
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