WTO warns Trump's tariffs risk reshaping global trade into two rival blocs

Yahoo

23-04-2025

WASHINGTON D.C. -- The Sino-American trade war could have drastic implications on the global economy and even split the world into two geopolitical trading blocs, according to the director general of the World Trade Organization, Ngozi Okonjo-Iweala.
The United States would lead one and China the other.
As the leader of the organization that regulates trade around the globe, Okonjo-Iweala outlined her concerns that Trump's tariff policies would disrupt the rules-based trading system. The future of international trade will depend on the ability of Beijing and Washington to come to an agreement.
The U.S. and China have been engaging in a "tariff war." The United States imposed 145% tariffs on Chinese imports while Beijing has imposed 125% on American imports.
President Trump has been waiting for Beijing to come forward for a deal. However, China does not seem to budge on their position. Moreover, as both superpowers try to diversify their trading partners, the Chinese Communist Party vowed to retaliate against countries who try to increase trade with the United States to the detriment of China, risking broader global consequences.
If the world splits into two geopolitical trading blocs, global GDP could decrease by 7%, warned the World Trade Organization.
There was a glimmer of hope for tariff negotiations on Wednesday when Chinese Foreign Ministry spokesperson Guo Jiakun said,
"China's attitude towards the tariff war launched by the U.S. is quite clear: we don't want to fight, but we are not afraid of it. If we fight, we will fight to the end; if we talk, the door is wide open," Jiakun said.
On April 14, the WTO released its Global Trade Outlook 2025 report and the main projections were negative. The WTO projected the amount of goods traded in 2025 would decline by 0.2 percent. This would be an almost 3% drop from what was projected before Trump enacted his sweeping tariffs.
North America's participation in global trade was forecasted to decrease by 1.7% and GDP growth would decline by 1.6%, the largest downturn among all geographical regions. Moreover, North America's total exports were projected to drop by 12.6% and imports by 9.6%.
The WTO also projected that Asia would also take a significant blow in GDP growth of 0.4%. The WTO expected the Sino-American trade war to inevitably affect the rest of the world. Chinese exports to regions other than North America were projected to grow between 4% and 9%.
Trump's unpredictability in global trade participates directly in these projections. The Chinese Ministry of Commerce said, "China will unswervingly focus on handling its own affairs well, using China's 'certainty' to counteract the 'uncertainty' of the external environment."
Furthermore, the least developed countries were the most likely to be vulnerable to these external pressures and might face competition with China in exports such as textiles and electronics. The trade between the United States and China only accounts for 3% of global trade. Trade between the other WTO members accounts for 87% of trade.
However, China and the United States hold the most economic influence.
"China-US trade is 3% of world trade. So when you look at that, it's small, but the potential of these two big trading partners being able to persuade and create these blocks has such a negative impact on world trade, and therefore on world growth as well," said Okonjo-Iweala.
Despite these dire projections, the director general also explained there could be opportunities for regions like Africa to diversify its exports amid this potential restructuring of trade.
"Africa's world trade has stagnated at about 3%. That's not good enough, because they are still exporting the same things. So, I think it is time to attract more value addition on the continent, and the potential is there, and it's so critical now, because aid is drying out," said Okonjo-Iweala, who is from Senegal, and is the first woman and African to lead the WHO.
Okonjo-Iweala also agreed with the Trump administration that there should be less over-dependence and more interdependence between countries.
"I've said very clearly that it does not build global resilience to have 95% of semiconductors made in one place. It does not build global resilience to have 10 countries export 80% of the vaccines used in the world when you have a pandemic, it just doesn't work. You need to decentralize," she said.
She echoed Trump's claim that restoring local manufacturing could increase jobs in America.
"I think this administration would argue we want to see a wholesale re-industrialization of America. We want more manufacturing jobs," Okonjo-Iweala said. "But there's a broader agenda here of creating what are viewed as better jobs that support a community, that create more possibility for workers to succeed than just services jobs."