Previous trade skirmishes "were always done in the framework of the WTO, within international rule of law," Stiglitz, a former World Bank chief economist, told CNBC on Saturday at the China Development Forum in Beijing.
"What makes things particularly of concern to me right now is that Trump has blocked the appointment of new judges at the WTO, and the WTO appellate body is getting hamstrung," Stiglitz continued, referring to the organization's seven-member panel that overlooks international disputes.
The body currently only has four members as Trump's administration blocks the selection process of new judges, accusing the 23 year-old organization of bias against the U.S.
The WTO has traditionally appointed new judges based on unanimity, said Stiglitz, who is currently a Columbia University professor. "They're reluctant to depart from that practice ... but it seems, to me, important for the world to do what they can to save our rules-based system."
Stiglitz called on Beijing to bring a trade case to the WTO "to show their commitment to the international rule of law," but he told CNBC he expects that China has a plan for hitting the U.S. with reciprocal tariffs that would hurt.
"You target where it hurts the most," he said, referencing how the European Union threatened tariffs on goods from the states that congressional leaders represented. "China has, I'm quite sure, a very good economic map with which they will target certain places in the United States where the pain will be maximized."
An escalating trade war, the Nobel laureate said, could have political ramifications for Trump — especially if trade partners' retaliations hit the pocketbooks of the president's base.
"If there is a broad range increase in tariffs, it would affect their cost of living, the inflation would lead the Fed to raise interest rates at a higher rate, it would certainly impose a risk to the return to the U.S. to robust economic growth," he said. "This may be the one thing that actually does change this group of people who seem to have stuck with him even as he demonstrated bigotry, misogyny, support of people who [have a] Nazi background."
"They stood with him so far. The question is: When their pocketbook gets hit, will they still?"