WTO urges US, China to de-escalate trade war

WASHINGTON: The head of the World Trade Organization said she is urging the US and China to de-escalate trade tensions, warning that a decoupling by the world’s two largest economies could reduce global economic output by 7 percent over the longer term.

WTO Director-General Ngozi Okonjo-Iweala told Reuters in an interview the global trade body was extremely concerned about the latest spike in US-China trade tensions and had spoken with officials from both countries to encourage more dialogue. “We’re obviously worried at any escalation of US-China tensions,” she said, noting the two sides had backed away from their first tariff escalation earlier this year, averting more serious consequences and she hoped that would happen again.

“Similarly, we are really hoping that the two sides will come together and they will de-escalate, because any US-China tensions and US-China decoupling (would) have implications not just for the two biggest economies in the world, but also for the rest of the world,” she said.

Both sides, Okonjo-Iweala said, understand the importance of good relations, given the implications for the global economy and other countries.

Any kind of decoupling that divides the world into two trading blocs would result in “significant global GDP losses in the longer term - up to 7 percent global GDP losses and double-digit welfare losses for developing countries,” she said.

ESCALATING TENSIONS REMAIN ‘SERIOUS RISK’ The WTO last week sharply lowered its 2026 forecast for global merchandise trade volume growth to 0.5 percent from its previous estimate of 1.8 percent growth in August, citing expected delayed impacts from US President Donald Trump’s tariffs. It raised its forecast for global goods trade growth to 2.4 percent for 2025. Those forecasts were issued before the relative calm of recent months was shattered last week when China imposed new export controls on rare earth metals needed for the technology sector, and Trump responded by imposing new 100% duties on Chinese imports starting next month.