The U.S.-China Trade War Threatens to Undo Decades of Progress Against Global Poverty

The World's Poorest People Will Be The First Victims of a US-China Trade War

Last August, I hosted a live taping of Global Dispatches at the World Trade Organization. One of my guests was Ralph Ossa, the WTO’s chief economist. He had just released a major report — and it’s one I haven’t stopped thinking about in recent days.

For years, economists have warned about “decoupling” — the slow drift apart of the U.S. and Chinese economies. For most economists, decoupling is a problem. They argue that global trade is what drives growth and raises living standards (even if unevenly). However, the trend toward decoupling is very real, driven by a variety of political concerns in both Washington and Beijing. What made Ossa’s report so groundbreaking is that his team examined the implications of the logical extension of decoupling: the full fragmentation of the global trading system into two seperate blocs, one lead by the United States, the other China. In this scenario countries are forced to pick sides, and trading between the blocs largely dried up.

This isn’t just a theory. Ossa’s research shows it’s already happening— and that was before the escalating trade war between the United States and China brought on by Donald Trump’s imposition of massive tariffs on all countries, but China most of all.

If full fragmentation occurs, the WTO report shows that global GDP could shrink by 7%, a loss of over $7 trillion from the global economy. The economic damage will be everywhere, but it will not be evenly distributed. No one would be hit harder than people in the developing world— particularly the poorest of the poor.