Donald Trump threatens to pull out of World Trade Organisation

Donald Trump says the US could pull out of the World Trade Organisation. Photo / AP

Donald Trump has ratcheted up the risk of a global trade war, saying the US could pull out of the World Trade Organisation while rejecting an EU offer to cut tariffs on cars.

The US president said America was being treated badly by WTO rules, adding that if the trade body "does not shape up, I could withdraw from the WTO".

The Daily Telegraph reports Trump has been highly critical of the WTO in the past, saying it "needs to change its ways".

US trade officials say the decision to admit China to the global trade body in 2001 was a mistake because the WTO system cannot work with a non-market economy.

Trump withdrawing the US from the WTO could prove more serious to the global economy than its simmering trade dispute with China.

So far this has involved tens of billions of dollars in tariffs being imposed in tit-for-tat moves on the import of each other's goods, with the US most recently threatening to slap another US$200 billion ($302.2b) of levies on products arriving from China.

Further upping the rhetoric, Trump told Bloomberg that the US would outlast China in a full-blown trade war.

"We are a much stronger country," he said. "Nobody's waiting us out. Our country is stronger than it's ever been financially."

In the past Trump has taken to Twitter to accuse China and the EU of "manipulating their currencies and interest rates lower" to boost their economies at the expense of the US.

He renewed his attack on China saying the Beijing government was "trying to make up for lack of business by cutting their currency". He added: "It's no good. They can't do that. That's not, like, playing on a level playing field."

In the same interview, Trump labelled the EU's trade policies as "almost as bad as China", and spurned a potential deal negotiated in July that would see the end of import tariffs on cars between the US and Europe, calling the terms "not good enough".

On Friday European Commission president Jean-Claude Juncker said that a "ceasefire" deal had been agreed while ways of lowering levies and boosting free trade could be thrashed out.

But he added that the EU would not let anyone determine its trade policies and would respond in kind. If Washington decided to impose tariffs on vehicles after all, "then we will also do that", Juncker said.

Markets fell on the news, with car makers on both sides of the Atlantic hit hardest. The dollar strengthened against sterling, the euro and the yuan as traders digested Mr Trump's words.

Ricardo Melendez-Ortiz, chief executive of the International Centre for Trade and Sustainable Development, called the "WTO far from perfect and no one disputes the need for reform".

He added: "Threats like the US President's highlight growing frustration, but what's missing are practical reform ideas and a plan for steering them to consensus. Delivering these will take a shared endeavour, with US participation, for the benefit of all."