As reported in the above-linked CNBC article, tensions over trade imbalances are heating up, not just in China, as head-lined in the article, but in Japan and Germany as well. It seems that the U.S. has proposed that other nations “cap” their current account surpluses (trade surpluses) at 4% of GDP:
The United States proposed at the G20 finance ministers’ meeting last month that countries should cap current account surpluses or deficits at 4 percent of GDP as part of efforts to rebalance the global economy.
It was one thing for Obama to suggest at the height of the global economic crisis that nations voluntarily work together toward rebalancing the global economy. All agreed, knowing full well that there would be no follow-through by the U.S. and they could return to business as usual. But it’s an entirely different matter for the U.S. to begin insisting on quotas.
China on Friday pushed back strongly against U.S. policies ahead of the G20 summit, ridiculing Washington’s plan to impose current account targets and warning of risks in the Fed’s monetary easing.
… The idea of numeric targeting met strong resistance from Japan and Germany …
U.S. patience with huge trade imbalances is wearing thin. Now, even the Fed has joined the fight with its new round of quantitative easing. If voluntary approaches and pressure on currency valuations don’t work, then the unavoidable question for the U.S. is “what do we do next?” There are only a couple of options – the ones I’ve steadfastly maintained are the only viable options: U.S.-imposed quotas and tariffs.
Forget all the post-election banter about “Obamacare” and about government spending. It’s all dwarfed in significance by this escalating global war for employment. The global trade regime set up in the wake of World War II in the hopes of preventing the next war has back-fired and is crumbling, and may very well have provided the catalyst for the next one.