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China warns U.S. that 'trade war' will hurt Americans even more

BEIJING — China's commerce minister warned the United States on Sunday that if it launches a "trade war" by levying punitive tariffs on Chinese imports, the United States will suffer the most.

Chen Deming also said the U.S. government's "obsession" with China's exchange rate could not be seriously addressed until it stopped blocking the export of high-tech products, such as supercomputers and satellites, to China. "If some congressmen insist on labeling China as a currency manipulator and slap punitive tariffs on Chinese products, then the (Chinese) government will find it impossible not to react," Chen said in an interview with the Washington Post. "If the United States uses the exchange rate to start a new trade war, China will be hurt. But the American people and U.S. companies will be hurt even more."

Chen's comments reflect the exasperation within the Chinese leadership regarding the United States' attempt to push China to allow its currency, the yuan, to rise against the dollar. In addition, Chen's remarks also underscore how China is seeking to use the current trade dispute with the United States to push its own agenda in Washington — to eliminate, or at least ease, the 20-year-old sanctions that limit American exports to China.

President Barack Obama has contended that if China lets the yuan appreciate, U.S. exports would increase. Sen. Charles Schumer, D-N.Y., is authoring legislation that would place tariffs on Chinese goods if China does not allow its currency to float more freely. On April 15, the Treasury Department is scheduled to release a report on worldwide currencies. Chen said the Chinese government does not want to be labeled a "currency manipulator."

Chen, who has studied at Harvard, said he didn't understand what the United States was attempting to achieve by threatening China with tariffs.

"You're not going to get 1.3 billion Chinese to change by insulting them," he said. "Could it be related to upcoming elections? I don't know. Because economically it makes no sense."

Chen said if the U.S. actions were geared toward decreasing America's trade imbalance by limiting imports, it wouldn't work. Perhaps imports from China would decrease, but that wouldn't mean that Americans would start producing goods such as telephones and televisions again. "That production isn't going to return to America, that's just not practical," he said. "Globalization has changed all that."

Chen said the best way for the United States to increase its exports to China would be to relax restrictions on the export of high-technology and dual-use goods to China. Since 1989, when the Chinese government launched a crackdown on student-led protests around Tiananmen Square, the United States has placed limitations on some exports. Chen said those limits have amounted to billions of a dollars a year of trade.

And he added that under such restrictions, talk about a more liberalized exchange system in China is a nonstarter. "If you want to discuss the exchange rate you have to do it under a free trading system," he said, "a system wherein if I want to buy something I can, and if you want to sell it you can."

China warns U.S. that 'trade war' will hurt Americans even more 03/21/10 [Last modified: Sunday, March 21, 2010 9:07pm]
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