The Director-General of the World Trade Organization (WTO), Dr Ngozi Okonjo-Iweala, has warned that the ongoing tariff war between the United States and China could slash bilateral trade in goods by as much as 80 percent, with damaging ripple effects for the global economy.

Speaking on Wednesday, Okonjo-Iweala said escalating tensions between the world’s two largest economies posed a serious risk to international trade stability.

“Our preliminary projections suggest that merchandise trade between these two economies could fall by up to 80 percent,” she said. “Such a contraction would have severe implications for the global economic outlook.”

Her warning came hours after former US President Donald Trump imposed additional tariffs on Chinese imports, raising levies to 125 percent. In response, China retaliated with an 84 percent tariff on US goods.

Despite the aggressive moves, Trump announced a 90-day pause on additional tariffs for other countries following widespread calls for negotiations.

Okonjo-Iweala expressed concern that the world economy could split into two competing blocs — one centred around the United States, the other around China.

“This fragmentation along geopolitical lines could result in a long-term reduction in global real GDP by nearly seven percent,” she noted.

The WTO chief called on member states to use dialogue and cooperation to prevent further deterioration.

“It is critical for the global community to preserve the openness of the international trading system. WTO members must act decisively to defend the rules-based order,” she said.

Despite recent market volatility, US stocks rallied after Trump’s announcement of the temporary pause.