Today's Coming Crisis Movie

Thursday, October 13, 2011

China-U.S. trade wars: What's at stake

China and the United States are the world's two largest economies and arguably each other's most important trading partners.

And now, it seems the two countries find themselves on the brink of a trade war.

The U.S. Senate, in a rare show of bipartisan agreement, passed a bill Tuesday that would slap steep taxes known as tariffs on imports from nations with undervalued currencies. It is a provision aimed squarely at China's yuan, and it prompted harsh attacks from Chinese officials.

"Should the proposed legislation be made into law, the result would be a trade war and that would be a lose-lose situation for both sides," said Vice Foreign Minister Cui Tiankai. "It would be detrimental to the development of economic ties and might have an adverse impact on bilateral relations."

But despite overwhelming support in the Senate, the bill might never become law as House Speaker John Boehner has signaled his opposition to it.

"I think it's pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency," Boehner said.

President Obama has also questioned whether he would sign the bill, saying he didn't want to pass "symbolic" laws that would be slapped down by the World Trade Organization. more