*Says decoupling may reduce world GDP by 7% in long-term

*Urges WTO members to use crisis to undertake reforms

Emmanuel Addeh in Abuja

The Director General of the World Trade Organisation (WTO), Ngozi Okonjo-Iweala, has urged the U.S. and China to de-escalate trade tensions, warning that a decoupling by the world?s two largest economies could reduce global economic output by 7 per cent over the longer term.

Okonjo-Iweala told Reuters in an interview reported at the weekend that the global trade body was extremely concerned about the latest spike in U.S.-China trade tensions and had spoken with officials from both countries to encourage more dialogue.

?We?re obviously worried at any escalation in the U.S.-China tensions,? she said, noting the two sides had backed away from their first tariff escalation earlier this year, averting more serious consequences and she hoped that would happen again.

?Similarly, we are really hoping that the two sides will come together and they will de-escalate, because any U.S.-China tensions and U.S.-China decoupling (would) have implications not just for the two biggest economies in the world, but also for the rest of the world,? she said.

Both sides, Okonjo-Iweala said, understand the importance of good relations, given the implications for the global economy and other countries.

Any kind of decoupling that divides the world into two trading blocs would result in ?significant global Gross Domestic Product (GDP) losses in the longer term ? up to 7 per cent global GDP losses and double-digit welfare losses for developing countries,? she said.

The WTO last week sharply lowered its 2026 forecast for global merchandise trade volume growth to 0.5 per cent from its previous estimate of 1.8 per cent growth in August, citing expected delayed impacts from the U.S. President Donald Trump?s tariffs. It raised its forecast for global goods trade growth to 2.4 per cent for 2025, Reuters said.

Those forecasts were issued before the relative calm of recent months was shattered last week when China imposed new export controls on rare earth metals needed for the technology sector, and Trump responded by imposing new 100 per cent duties on Chinese imports starting next month.

Okonjo-Iweala said she told officials from the Group of 20 major economies on Wednesday evening that there could be no global financial stability without global trade stability.

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

Okonjo-Iweala said most WTO members had refrained from joining in the tariff war, and 72 per cent of global trade was still following WTO rules despite a series of bilateral trade deals signed by the U.S. with other countries.

The rules-based multilateral system was proving resilient despite the most severe policy shock in eight decades, she said.

But Okonjo-Iweala said organisations like the WTO should use the current multilateralism crisis to undertake long-sought reforms and make the global trade body more flexible and efficient, and able to take advantage of new trade opportunities in 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, and you will need global cooperation to do it, and that?s where multilateralism will still be very, very relevant,? she said. ?But to make sure that the organisations are really appreciated, we have to reform, and at the WTO, we are ready to work on this,? she noted.

Okonjo-Iweala said she had a good meeting on Wednesday with Deputy U.S. Trade Representative Joseph Barloon, who was confirmed last week as the U.S. ambassador to the WTO.

She said she was very appreciative that the U.S. had removed the WTO from its list of planned spending cuts to international organisations, and efforts were underway to settle U.S. arrears to the trade body. (This Day)

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