World trade body warns of 'domino effect' in US-China spat

GENEVA — The head of the World Trade Organization says he understands that President Donald Trump wants to create U.S. jobs, but warns that getting tough on trade can trigger a "domino effect" that could derail such goals in the first place.

Speaking to The Associated Press, Roberto Azevedo waded delicately into the possible impact of a simmering U.S.-China dispute involving tit-for-tat tariffs that could escalate into a trade war with consequences for the global economy.

Asked if he could understand Trump supporters who want to see U.S. manufacturing jobs return home, Azevedo said that "every country, every leader" wants to create jobs, improve work conditions and improve salaries.

But, he said, "actions that you take are not the end of the process" but can prompt retaliation.

"And that kind of domino effect may have implications that will undermine your original goals," he said.

Trump has led efforts to slap penalties on $150 billion worth of imports from China, creating fears of a trade war among investors and leading to wild swoons in global stock markets. China has responded with a decision to tax $50 billion in U.S. products like soybeans and small aircraft.

Under the leadership of the Brazilian-born lawyer, the 23-year-old WTO has faced criticism that is ill-equipped to ensure fair and free trade — as epitomized by Trump's complaints about a yawning U.S. trade deficit with China and claims it is swiping coveted intellectual property.

Trump has called the WTO "unfair" to the United States, raising speculation that the U.S. might exit the organization if its efforts to challenge Chinese policies through the trade body don't go its way.

"I think the WTO doesn't run the risk of losing anybody right now," Azevedo said of its 164 members. "I have no indication whatsoever that the U.S. is planning to walk out, and they have not attached their permanence in the WTO to any kind of outcome."

"On the contrary," he added, "I think this is a place where countries are coming to figure something out."

Azevedo said he had heard from several members, not just the U.S., that the WTO's rules needed to be updated and improved for a 21st century world. "That's a conversation that members have to have," he said.

The comments came after Azevedo chaired an annual WTO news conference to lay out its predictions for trade, but acknowledging they are clouded by the possible fallout from the spat between the U.S. and China.

In a relatively upbeat forecast compared to previous years, the WTO is predicting 4.4 percent growth this year and 4 percent next year — though it warned that tensions and retaliatory measures like those laid out by the U.S. and China could compromise those predictions.

"Let me be clear," Azevedo said, "these forecasts do not — and I repeat, they do not — factor-in the possibility of a dramatic escalation of trade restrictions."

He noted there were already signs that "the threat alone of escalation" could be having a negative effect, with recent surveys of business activity showing a slowdown in export orders.

He acknowledged that some critics believe the trade body may not survive if the U.S-China crisis spirals out of control, and played down talk about its demise.

"The more complicated the situation is, the more turbulence you see out there, the more important the WTO is — the more essential it is.

I'm pretty comfortable that we're going to see a very long, long life for the WTO."

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