There is speculation in Washington today of the possibility that the Senate may vote on imposing trade sanctions on China to force them to compete in international trade on an even playing field. The option of placing strict tariffs on export products from China to the US has become an increasing likelihood with China's refusal to cease devaluing the yuan in order to gain in an international trade. The movement in support of this proposal is spearheaded by Senators Charles Schumer and Lindsey Graham.

Both Senators Schumer and Graham had a private meeting with the new Treasury Secretary, Henry Paulson. Secretary Paulson had just returned from a trip to China the week before. They said that they informed Secretary Paulson that the current business situation between the US and China, as well as China's current position with regards to international trade, is unacceptable.

Senator Schumer mentioned that Secretary Paulson believes that something can be done about the situation without having to resort to sanctions. While Senator Schumer shares Secretary Paulson's belief, he also commented that China is unlikely to change its current business practices in international trade unless there is some sort of significant "push" for the country to do so. The possibility of a 27.5% increase in Chinese trade tariffs, called the Graham-Schumer measure, currently has considerably less supporters within the House of Representatives than it does in the Senate.

It has been acknowledged by Senator Graham that the potential political backlash of such an action may last longer than anyone currently expects and may have severe detrimental effects on US trade relations. One additional factor to consider is that there are a few American companies that find China's current set-up beneficial. Furthermore, there is also the possibility that China might use its own trade sanctions to counter any US measure. The economic and financial side effects of such a move is expected to be potentially disastrous for international trade as China has become a major importer and exporter in the world market.

The expanding bilateral trade gap, which amounted to $200 billion dollars last year, is a growing concern for analysts. Former chief economist for the U.S. International Trade Commission, Peter Morici, believes that the White House is unwilling to provoke large, multinational corporations, such as General Electric and General Motors, because they are making a profit in China. This unwillingness to act has allowed Beijing to simply ignore any requests for them to take any meaningful action towards adjusting their current business set-up.

Schumer and Graham said that if the vote on imposing international trade sanctions on China is not acted upon before the Senate adjourns, it may be enough that they have raised the issue and highlighted the situation regarding China's currency manipulation and the advantage it gives them in international trade.