The Democratic takeover of Congress last November is leading to tough talk about U.S./China trade relations and fears among some business leaders of harder times dealing with China and its beckoning market. But at least some observers suggest that all the bluster on Capitol Hill may actually be a blessing in disguise for American businesses.Some observers think that China cannot afford a trade war at this point and the more the U.S. threatens, the more China may feel compelled to placate. That being the case, all the bluster may have an unintended consequence. "It's possible," suggests Sallie James, a trade policy analyst at the Cato Institute in Washington, "that China could respond to Congressional threats by going on a buying spree in the U.S., or by making another token revaluation of the yuan."

For now, however, the talk is pretty tough. U.S. Sen. Charles Schumer (D-N.Y.), with the backing of U.S. Sen. Lindsay Graham (R-S.C.), is calling for tariffs on all Chinese goods unless China significantly revalues the yuan. Congress also wants the administration to insist that China adhere to World Trade Organization (WTO) rules on opening up its economy and on enforcing intellectual property rights. In response, the Bush administration is trying to head off Congressional action by taking a tougher line itself. In February, for the first time in 23 years, the Commerce Department slapped a punitive tariff on Chinese treated-paper products, charging governmental subsidies in violation of WTO rules.

"There's no doubt that the Democratic Congress is talking tougher, and that the Bush administration is responding in a limited way to try and defuse the issue," says Cato's James.

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