RIYADH: According to the World Trade Organization, a full-scale trade war between the US and China might split the world economy into competing blocs and eventually reduce global growth by 7%. According to WTO Director-General Ngozi Okonjo-Iweala, there may be significant repercussions if bilateral commerce between the two biggest countries in the world fell by as much as 80%. This coincides with President Donald Trump’s announcement of a significant change in trade policy: broad import levies on all goods entering the US. He increased tariffs on Chinese goods to 125 percent while imposing a temporary 90-day delay for certain nations, claiming a “lack of respect” following Beijing’s retaliatory 84 percent duty on US imports.
“This tit-for-tat strategy between the two biggest economies in the world, whose bilateral trade makes up about 3% of global trade, has wider implications that could seriously harm the outlook for the global economy,” stated Okonjo-Iweala. “A split of the world economy into two blocs could result in a long-term decline in global real GDP of almost 7%,” she continued. The consequences would disproportionately affect developing countries, especially those classified as least developed.
Okonjo-Iweala underlined that “trade diversion remains an immediate and pressing threat, one that requires a coordinated global response,” and he urged WTO members to settle disagreements through discussion. First announced on April 2 and updated on April 10, the policy change represents a fresh drive for Trump’s “America First” agenda and a dramatic increase in trade hostilities. At a White House briefing on April 2, Trump criticized friends like Canada and Mexico for what he described as unfair trade practices, saying, “In many cases, the friend is worse than the foe in terms of trade.”
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