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Global Trade Body Sounds Alarm Over Economic Consequences
The Director-General of the World Trade Organization, Ngozi Okonjo-Iweala, is urgently calling for the United States and China to de-escalate their ongoing trade tensions, according to reports from Reuters. The WTO chief warned that a full decoupling between the world’s two largest economies could reduce global economic output by 7% over the longer term and cause double-digit welfare losses for developing countries.
Sources indicate that Okonjo-Iweala has held direct discussions with officials from both nations, emphasizing the critical need for renewed dialogue. “We’re obviously worried at any escalation of U.S.-China tensions,” she stated in the interview, noting that both sides had previously stepped back from tariff escalations earlier this year. Analysts suggest this precedent offers hope that further escalation might be avoided through diplomatic channels.
Recent Escalations Threaten Global Stability
The warning comes as recent developments have shattered months of relative calm in U.S.-China relations. The report states that China recently imposed new export controls on rare earth metals essential for the technology sector, while the United States under President Donald Trump responded with planned 100% duties on certain Chinese imports set to take effect next month.
According to the analysis, the WTO had already significantly downgraded its 2026 global trade growth forecast to just 0.5% from the previous 1.8% estimate, citing expected delayed impacts from earlier U.S. tariffs. The trade body now projects global goods trade growth of 2.4% for 2025, though these forecasts preceded the latest round of escalations.
Developing Nations Face Disproportionate Impact
Okonjo-Iweala emphasized that the consequences extend far beyond the two economic superpowers. “Any U.S.-China tensions and U.S.-China decoupling have implications not just for the two biggest economies in the world, but also for the rest of the world,” she stated. The report indicates that developing countries would suffer the most severe welfare losses under a scenario where the global trading system splits into two competing blocs.
The WTO chief reportedly told G20 officials that “there could be no global financial stability without global trade stability,” noting that “pressures on the system have not eased and may intensify.” She described escalating tensions between the United States and China as remaining “a serious risk” to the global economic outlook.
Multilateral System Shows Resilience Amid Challenges
Despite the tensions, the report states that most WTO members have refrained from joining the tariff war, with 72% of global trade still following WTO rules. Okonjo-Iweala characterized the rules-based multilateral system as proving resilient despite what she described as “the most severe policy shock in eight decades.”
The WTO chief emphasized that organizations like hers must use the current crisis to undertake long-sought reforms, making the global trade body more flexible and efficient. She specifically mentioned the need to better address new trade opportunities in digital trade, services, and green trade, areas where significant strategic investment opportunities are emerging across global markets.
Path Forward Requires Cooperation and Reform
Okonjo-Iweala expressed optimism about recent engagement with U.S. officials, including a meeting with newly confirmed U.S. Ambassador to the WTO Joseph Barloon. She noted appreciation that the United States had removed the WTO from its list of planned spending cuts to international organizations and that efforts were underway to settle U.S. arrears to the trade body.
“There’s absolutely no doubt that there are global problems that cannot be solved by any one country alone,” she stated, emphasizing that global cooperation through multilateral organizations remains essential. This perspective aligns with broader industry developments where international collaboration is increasingly critical for addressing complex global challenges.
The WTO chief’s warnings come amid other significant recent technology advancements and related innovations in global markets. As market trends continue to evolve, the stability of international trade relations remains a cornerstone for sustainable economic growth. Additional industry developments in technology sectors further highlight the interconnected nature of global supply chains that would be disrupted by continued trade tensions.
This coverage is based on reporting from Reuters content and has been prepared in compliance with journalistic standards for attributed reporting.
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