Tensions Between China and America Rise

Oct 01, 09 Tensions Between China and America Rise
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The United States and China are engaged in an escalating trade conflict that may take a turn for the worse, sooner than later.  China and the United States have had a trade imbalance for a long time.

This trade deficit always favored China because the United States always imported bought more of their goods.  However, President Obama made good on a promise that he made to labor unions and decided to raise tariffs on Chinese tires by as much as 35%.

In response, China is trying to raise tariffs on American auto products and chicken meat.

Economists and Obama administration officials are concerned about the growing nationalist sentiment expressed by many Chinese citizens.  A growing segment of young, aware, and financially successful Chinese people recognize that China is on its way to becoming a world power.

They pushed the leaders in China to issue the immediate and stern response to what they saw as American provocation.  Most U.S. tensions with China have been mostly tough talk in public backed by feverish behind the scenes diplomacy.

However, China currently owns $2 trillion worth of foreign reserves, which puts in a position to harm the United States economy.

The Bush and Obama administrations have usually tread lightly when it comes to China.  China could possibly stop buying or start selling American dollars.  That they have continued to finance our debt and they have no incentive to stop doing so.

Yet, financial economists recognize that an American/Chinese trade war could have a detrimental impact on a global economy that is slowly beginning to recover.

There is no easy way for the United States to extricate itself from its precarious relationship with China.  Finding a way to do so, especially in an increasingly interconnected global economy, will be the key to remaining a dominant global power.

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