Trade relations between China and the US are at risk of a significant collapse, according to a warning issued by the World Trade Organization.
In a significant move, the USA has reportedly paused its contributions to the World Trade Organization (WTO), while China has filed a complaint against the new US tariffs. Despite this, the impact on global trade has been relatively minimal, as the bilateral trade between China and the USA accounts for only about 3% of global trade.
After the trade tensions with the USA and the resulting decline in Chinese exports to the US (down by about 10.7% or $25.7 billion in the first half of 2025), China has shifted its export focus. The primary beneficiaries of this shift have been the Association of Southeast Asian Nations (ASEAN) countries, the European Union (EU), and Africa.
Exports to ASEAN countries rose by 13% (+$37.1 billion), while exports to the EU increased by 6.9% (+$16.3 billion. Exports to Africa jumped by 21.4% (+$18.2 billion). In contrast, exports to Russia fell by 8.7% (-$4.5 billion) during the same period.
This regional diversification is helping China offset decreased demand from the US while maintaining overall export growth. The shift is particularly evident in high-tech and capital-intensive sectors, including semiconductors, lithium batteries, electric vehicles, and machinery parts, which are increasingly being sold to non-US markets.
The WTO chief economist, Ralph Ossa, sees this trade policy of the US government as a wake-up call for Europe and the world. He emphasizes the importance of managing these redirection effects cooperatively to prevent the trade conflict from escalating further. He also suggests that Europe should aim to export to America, but also maintain its ties with the rest of the world.
The WTO has lowered its forecast for global economic growth to 2.2 percent, down from 2.8 percent, as expected before the US tariff announcements. The organization expects the volume of global trade to shrink by 0.2 percent this year - in the worst-case scenario by 1.5 percent.
Meanwhile, Canada has filed a complaint with the WTO against China's additional tariffs on agricultural and fishery products. The WTO had warned on Wednesday of a decline in global trade due to the trade dispute.
Ralph Ossa's comments indicate that the declines in global trade are significant and need immediate attention. He also suggests that it is important now to protect global trade, as declines in global trade are most significant in North America, specifically in the USA, Canada, and Mexico.
In summary, the primary destinations of China’s exports outside the USA post trade tensions are ASEAN countries, the European Union, Africa, and Russia. This shift in trade patterns is a response to the US trade policy and highlights the need for global cooperation to maintain a healthy and balanced global trade system.
- The economic and social policy shift in China's export focus, away from the USA, has led to increased business with countries such as ASEAN, the European Union, Africa, and Russia.
- As the WTO chief economist, Ralph Ossa, has emphasized, this redirection of trade exposes the vulnerability of the global trade system, particularly in sectors like high-tech, finance, and industry.
- In light of declining global economic growth and trade due to trade disputes, it is crucial for politics, particularly in North America (USA, Canada, and Mexico), to consider implementing financial measures and general-news strategies to protect their business interests and maintain the balance in the global trade system.
