The World Trade Organisation (WTO) Director General, Ngozi Okonjo-Iweala, has expressed concern over the escalating trade tensions between the United States and China, warning of potential global economic losses. In a recent interview, Okonjo-Iweala stated that if the trade agitations continue, global economic output could be reduced by seven per cent over the longer term.

The WTO had previously lowered its 2026 forecast for global merchandise trade volume growth to 0.5 per cent, citing expected delayed impacts from US President Donald Trump’s tariffs. The organisation also raised its forecast for global goods trade growth to 2.4 per cent for 2025. These forecasts were issued before China imposed new export controls on rare earth metals, prompting the US to impose new 100 per cent duties on Chinese imports.

Okonjo-Iweala noted that both the US and China understand the importance of good relations, given the implications for the global economy and other countries. She emphasized that any kind of decoupling that divides the world into two trading blocs would result in significant global Gross Domestic Product (GDP) losses and double-digit welfare losses for developing countries.

The WTO Director General also addressed officials from the Group of 20 major economies, stating that there could be no global financial stability without global trade stability. She warned that pressures on the system have not eased and may intensify, with the full effects of recent tariffs still to be felt.

Despite the challenges, Okonjo-Iweala noted that most WTO members have refrained from joining the tariff war, and 72 per cent of global trade is still following WTO rules. She emphasized the need for organisations like the WTO to undertake long-sought reforms, making the global trade body more flexible and efficient, and able to take advantage of new trade opportunities in digital trade, services, and green trade.

The WTO Director General recently met with Deputy US Trade Representative Joseph Barloon, who was confirmed as the US ambassador to the WTO. Okonjo-Iweala appreciated the US decision to remove the WTO from its list of planned spending cuts to international organisations and noted efforts to settle US arrears to the trade body.

The ongoing trade tensions between the US and China have significant implications for the global economy, and Okonjo-Iweala’s warnings highlight the need for a cool-off between the two world’s largest economies. As the WTO continues to navigate the challenges of global trade, its Director General’s call for reforms and cooperation underscores the importance of a rules-based multilateral system in promoting global economic stability and growth.