China-U.S. trade tussle may get worse

The Clash of the Titans. The Rumble in the Jungle. War of the Roses.

None of these tried-and-true cliches properly captures the potential havoc on the world's economy that a trade war between the U.S. and China could have as one of the world's greatest consumer is pitted against the world's top manufacturer (of most consumer goods). The latest kerfuffle is over tires.

Late Friday, President Barack Obama said the U.S. would levy tariffs of up to 35 percent on Chinese tires. The Chinese government issued what the New York Times called a "formulaic" response to the criticism. Anti-American rheortic -- no doubt planned -- then heated up on Chinese Web sites.
The Chinese government early today (Beijing time) said it was taking the first steps toward imposing additional duties on a variety of products that need the Chinese market including chicken meat and automotive products.

Such a move would have disastrous consequences for both industries. China is a top market for U.S. poultry and producers have complained bitterly that the government of the world's most populous country has blocked sales of U.S. poultry meat and eggs, a claim flatly denied by the Chinese. General Motors Corp., for now the top U.S. automaker, posted record sales in China earlier this year.

The U.S. exported about $71.5 billion in goods to China in 2008. During that same time, the U.S. imported more than $337 billion worth of goods. Many economists have noted that the $585 billion Chinese economic stimulus seems to be working better than the $787 billion U.S. plan, further straining their trade relationship.

Sometimes, the U.S. and China seem to bicker like and an old married couple that can't live or without one another. It's amazing how these sorts of relationships have their ups and downs. In the case of the U.S. and China, things seemed much better earlier this year. In April, the two countries formed the U.S.-China Strategic and Economic Dialogue (S&ED) and in July it appeared as though some progress was being made. U.S. China Business Council President John Frisbie noted in a press release that "we are pleased that the United States and China continue to work together to restore economic growth."

If the trade spat becomes a trade war, the U.S. and China will find that making up is hard to do.
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