ISTANBUL

The World Trade Organization (WTO) estimated Wednesday that rising trade friction between the US and China could reduce trade between the two by as much as 80%.

"The escalating trade tensions between the United States and China pose a significant risk of a sharp contraction in bilateral trade," WTO Director-General Ngozi Okonjo-Iweala said in a statement.

"This tit-for-tat approach between the world’s two largest economies, which together account for roughly 3% of global trade, carries wider implications that could severely damage the global economic outlook," she added.

Okonjo-Iweala said the negative macroeconomic effects would not be confined to the US and China but extend to other economies, especially least-developed nations.

"A division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly 7%," she said.

US President Donald Trump last week announced tariffs of 10-50% on more than 180 countries, rocking world markets.

China initially received a 34% tariff on April 2, but later was subjected to a 50% additional tariff by the US president as it did not withdraw a 34% retaliatory tariff on the US.

In his latest move, Trump announced Wednesday that the total tariff rate on China was increased to 125%, while granting more than 75 nations a 90-day reprieve from a Wednesday deadline in which they were expected to be hit with tariffs above his 10% baseline, in some cases many multiples higher than that figure.