Long-simmering trade tensions between the United States and China have broken out into open verbal warfare, with some highly respected and influential voices on trade now advocating an all-out economic war with the Asian giant.
At the center of the dispute is the gigantic U.S. trade deficit with China, which, at $226.8 billion in the first 10 months of the year and growing, is the largest such imbalance in the world. The bilateral imbalance came back with a vengeance in 2010 after retreating during the recession from all-time highs of around $260 billion.
Adding fresh fuel to the clash, the Commerce Department reported Friday the U.S. trade deficit with China for October marked a 20 percent increase from the same period last year. At that pace, the bilateral trade gap would total about $272 billion for the entire year.
By some estimates, the China-driven trade deficit cut potential growth in the U.S. economy in half from 4 percent to 2 percent in 2010 as consumers showered money on imports rather than U.S.-made goods — preventing the creation of millions of jobs had those purchases been directed at U.S. goods and services.
Private trade analysts who typically extol the benefits of free and open global commerce say the size and persistence of the U.S.-China imbalance call for new thinking.
The U.S. faces a "dilemma" over what to do because it has been unable to get substantial cooperation from China, Mr. Levy said. Unilateral action, including tariffs and other limits on Chinese imports, he said, runs the risk of triggering a potentially worldwide trade war.
China could retaliate not only by limiting imports of such vital U.S. exports as airplanes and heavy construction equipment, but also as the biggest buyer of U.S. Treasury bonds. It could trigger a financial crisis by boycotting purchases of U.S. debt at a time when the American budget deficit has surged to well over $1 trillion a year.
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At the center of the dispute is the gigantic U.S. trade deficit with China, which, at $226.8 billion in the first 10 months of the year and growing, is the largest such imbalance in the world. The bilateral imbalance came back with a vengeance in 2010 after retreating during the recession from all-time highs of around $260 billion.
Adding fresh fuel to the clash, the Commerce Department reported Friday the U.S. trade deficit with China for October marked a 20 percent increase from the same period last year. At that pace, the bilateral trade gap would total about $272 billion for the entire year.
By some estimates, the China-driven trade deficit cut potential growth in the U.S. economy in half from 4 percent to 2 percent in 2010 as consumers showered money on imports rather than U.S.-made goods — preventing the creation of millions of jobs had those purchases been directed at U.S. goods and services.
Private trade analysts who typically extol the benefits of free and open global commerce say the size and persistence of the U.S.-China imbalance call for new thinking.
The U.S. faces a "dilemma" over what to do because it has been unable to get substantial cooperation from China, Mr. Levy said. Unilateral action, including tariffs and other limits on Chinese imports, he said, runs the risk of triggering a potentially worldwide trade war.
China could retaliate not only by limiting imports of such vital U.S. exports as airplanes and heavy construction equipment, but also as the biggest buyer of U.S. Treasury bonds. It could trigger a financial crisis by boycotting purchases of U.S. debt at a time when the American budget deficit has surged to well over $1 trillion a year.
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