The Observer | Business | US-China trade war looms

The Observer | Business | US-China trade war looms:

"Senators' protectionist anger over $200bn trade gap puts pressure on Beijing and risks damaging future strategic relations

Heather Stewart, economics correspondent
Sunday March 26, 2006
The Observer

(The price of C, Tea, and about 80% of Americas's goods will now go up at least 30%! - ed.)

American senators could vote this week to slap tariffs of 27.5 per cent on all Chinese goods, amid a rising clamour of protectionist anger on Capitol Hill.

The sponsors of the so-called Schumer-Graham Bill were in Beijing last week - Chuck Schumer's first official trip overseas in 25 years - to press home the message that China's cheap currency gives it an unfair advantage over the Americans. Schumer, a Democrat who represents New York, and his Republican co-sponsor, Lindsey Graham of South Carolina, have been promised a vote on the measure by the end of March.

Beijing announced a revaluation of the yuan last year, but so far it has only been allowed to appreciate against the dollar within tight limits - too slowly for Schumer, who said in Shanghai on Friday: 'We are not going to give up until we've seen a plan [from China].'

The US ran a trade deficit of more than $200bn with China last year, as shoppers sucked in low-cost consumer goods from the fast-growing economy. Like Japan in the Eighties, China is the target of protectionist rhetoric.

'There's a growing antipathy to free trade in Congress, and the Bush administration is fully on board,' says Dan Ikenson of free market think-tank the Cato Institute. Treasury Secretary John Snow has repeatedly pressed the case for the Chinese to float their currency.