The World Trade Organization (WTO) estimated that the U.S.-China trade tensions could reduce the trade of goods between the two economies by as much as 80 percent.
“This tit-for-tat approach between the world’s two largest economies, which together account for roughly 3 percent of global trade, carries wider implications that could severely damage the global economic outlook,” it stated. Dividing the global economy into two blocs in this manner could lead to a long-term reduction in global real GDP by nearly 7 percent, the statement added.
Preliminary estimates amidst rising tariffs
The preliminary estimate was released around the time U.S. President Donald Trump further raised tariffs on imports from China but opted to pause some others for 90 days.
On Wednesday, President Donald Trump announced a complete three-month pause on all the “reciprocal” tariffs that went into effect at midnight, with the exception of China. This marked a remarkable reversal for a president who had historically insisted that the exceptionally high tariffs were here to stay. However, significant tariffs will remain on China, the world’s second-largest economy.
Trump stated that these tariffs would be increased to 125 percent from 104 percent following China’s announcement of additional retaliatory tariffs against the United States earlier that same day. He noted that all other countries subjected to reciprocal tariff rates would revert to the universal 10 percent rate.
“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125 percent, effective immediately,” Trump declared in his social media post. “At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A. and other countries is no longer sustainable or acceptable,” he wrote.
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Canada, Mexico tariffs left unchanged by Trump trade shift
Mexico and Canada won’t face the 10 percent tariffs, Reuters reported citing a White House official. Almost every good coming from these two nations will continue to be tariffed at 25 percent, unless they comply with the U.S.-Mexico-Canada Agreement, in which case they will not face tariffs. However, this does not apply to sector-specific tariffs imposed by Trump.
