A game of cat-and-mouse between Washington and Beijing intensified yesterday after Congress gave the go-ahead on a bill that increases tariffs on Chinese goods. Those overseas have already fired back, however, and the consequences could be chaotic.
Though the US bill that was aimed at hitting so-called “currency manipulators” like China will most likely fail to receive votes in the House, China is taking the game that Washington has waged seriously and last night decided to lower the value of the yuan in retaliation to what DC hoped they wouldn’t do.
Domestically, lawmakers had hoped that tariffs imposed on Chinese exports would convince the country to readjust the currency of the yuan, and though US politicians had presupposed that the battle between the two nation’s economies would be a cold one, China has called their bluff and upped the ante.
It has seemed clear that passing of the bill into a law in America would all but happen, with lawmakers hoping the threats of legislation would worry the Chinese into revaluating their currency to a high dollar amount that the US would favor. While America’s threats were largely seen as empty, China’s real response will only worsen matters in the United States, where the country is currently engrossed in a trade deficit. Now with China’s response to America’s attempt at spooking currency bosses overseas, the US’ deficit will surely take a turn for the worse.
Though American leaders had shrugged off warnings of a trade war between nations as impossible, things are quickly heating up. Chinese Foreign Ministry spokesman Ma Zhaoxu has quickly fired back at US leaders by saying that the new bill “gravely violates World Trade Organization rules” and continued support out of the States could be detrimental to not just the relationship between the two massive economies but for the rest of the world.
“China urges the US government, Congress and all quarters to resolutely oppose using domestic legislation to create a fuss about and put pressure on the renminbi exchange rate,” Ma writes on the website for the Foreign Ministry. The “renminbi” is a common name applied to the yuan, the official currency of China.
Ma adds that if the legislation passes in the House it will “disrupt the shared efforts of China and the United States, as well as the international community, to promote vigorous recovery and growth in the global economy.”
Last month China expressed anger over American politicians for giving Taiwan nearly $6 billion towards military upgrades which Beijing said could pose a threat to their own country. At the time, Minister Zhang Zhijun said the deal would “inevitably undermine bilateral relations as well as exchanges and cooperation in military and security areas.”
Investigative journalist Wayne Madsen told RT then that “If its weaponry that China doesn’t look at as aggressive towards China, they will probably be okay with . . . But if it’s any sort of advanced weaponry, were going to see some problems between Beijing and Washington.”
Now a debate over an impending trade war escalates aggressions between the countries.
Jin Canrong, a professor at Renmin University in Beijing, tells Reuters, “If this bill is passed, and the United States exacts tariffs as the bill demands, I think China will respond by imposing tariffs on some U.S. products,”
“If it turns into a trade war, it is the most momentous thing of 2011,” economist Jim Rogers told RT last month. “Trade wars always lead to wars. Nobody wins trade wars, except general who end up fighting the physical wars when they happen. This is very dangerous.”