Okonjo-Iweala Warns U.S.-China Trade War Could Cut Global GDP by 7%

World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala has warned that escalating trade tensions between the United States and China could slash global economic output by up to seven per cent in the long term if they persist.

In an interview published by Reuters over the weekend, Okonjo-Iweala said the world economy was already feeling the effects of rising tariffs and protectionist measures. Her comments came after the WTO sharply cut its 2026 global trade growth forecast to 0.5 per cent from 1.8 per cent, citing delayed impacts of new tariffs introduced by U.S. President Donald Trump.

The WTO, however, raised its projection for 2025 global goods trade growth to 2.4 per cent, the report added.

The warning followed renewed tensions last week after China imposed new export controls on rare earth metals critical to the technology industry, prompting Washington to announce 100 per cent duties on Chinese imports starting next month.

“We’re obviously worried about any escalation in the U.S.-China tensions,” Okonjo-Iweala said. “Any kind of decoupling that divides the world into two trading blocs would result in significant global GDP losses — up to 7 per cent — and double-digit welfare losses for developing countries.”

She expressed hope that both sides would again step back from confrontation, as they had earlier in the year, to avoid damaging global supply chains and investor confidence.

Okonjo-Iweala told Group of 20 (G20) officials on Wednesday that global financial stability could not be achieved without global trade stability.

“Pressures on the system have not eased and may intensify. The full effects of recent tariffs are still to be felt,” she warned. “Trade diversion is fueling protectionist sentiment elsewhere, and escalating tensions between the United States and China remain a serious risk.”

Despite the turbulence, Okonjo-Iweala said 72 per cent of global trade was still being conducted under WTO rules, a sign that the multilateral trading system remained resilient amid “the most severe policy shock in eight decades.”

She argued that the crisis in multilateralism should be used as an opportunity to reform and modernize the WTO, making it more efficient and better equipped to address emerging issues such as digital trade, services, and green trade.

“There’s absolutely no doubt that there are global problems that cannot be solved by any one country alone,” she said. “We have to reform to ensure organisations like the WTO remain relevant, effective, and appreciated.”

Okonjo-Iweala also revealed that she had a “good meeting” with Joseph Barloon, the new U.S. ambassador to the WTO, and welcomed Washington’s decision to remove the trade body from its list of spending cuts. She added that efforts were ongoing to settle U.S. arrears owed to the WTO.