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Greenspan warns against China tariffs

WASHINGTON - Federal Reserve chairman Alan Greenspan warned Congress on Thursday not to rush to impose punitive tariffs on imports from China, saying they would harm U.S. consumers and protect "few if any American jobs."

It marked Greenspan's most blunt assessment that currency-related legislation that has attracted support from two-thirds of the Senate would harm the U.S. economy by driving up prices for the Chinese products Americans crave.

He said a move toward protectionism in the world's largest economy could also unsettle global financial markets while doing little to protect jobs in this country.

Some lawmakers want to impose hefty 27.5 percent tariffs on Chinese goods flowing into the United States if Beijing doesn't move to a more flexible currency system. American manufacturers contend Chinese currency is undervalued by as much as 40 percent, making that country's goods cheaper in the U.S. market and U.S. products more expensive in China.

The Fed chairman said any sales lost by China would just be made up by other countries in Asia and possibly Latin America who would be able to ship textiles, assembled computers, toys and similar products into the United States without facing the extra 27.5 percent tariffs. "Few, if any American jobs would be protected," he told the Senate Finance Committee.

However, the prime sponsors of the legislation argued that Greenspan was wrong and the measure would have a positive effect, especially if China agrees on its own to stop linking its currency, the yuan, to the U.S. dollar.

Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., the prime sponsors of the legislation said it had provisions whereby President Bush could delay for up to two years imposing the 27.5 percent across-the-board tariffs if negotiations with the Chinese were making progress.

Sponsors of the legislation said they expected to have a vote before the full Senate in July. However, even if it wins approval there, it is likely to face a tougher battle in the House and Bush would almost certainly veto the proposal.

[Last modified June 24, 2005, 00:46:17]