Tim Geithner, the recently appointed Secretary of Treasury, accused China of currency manipulation last month in comment tucked into 102 page Senate questionaire. The statement has legal trade implications which could further harden the Sino-American bond in an already strained relationship. The root of the problem lies in failure of the Chinese to accelerate the appreciation of the yuan; preferring to hold a massive foreign reserve in dollars. As America imports more goods from China, the dollars that are sent to China are reinvested in U.S. institutions instead of being converted to the yuan.

The argument goes that the investments have lowered interest rates to a point where it facilitated more consumer borrowing and allowed people to keep accruing debt. Once a country is listed by the U.S. Treasury as currency manipulators, negotiations to change the currency exchange policy will begin. Being listed is a politically damaging incrimination that has could put America at odds with its trading partners.

Premier Wen Jiabao's speech at the World Economic Forum fired back by criticizing the "inappropriate macroeconomics policies of some economies", "prolonged low savings and high consumption", and at the "lack of self-discipline among financial institution and rating agencies". This spat of words is a sign of colder alliances for world economies attempting to enact a cohesive plan to counter the recession.

The fall of the U.S. stock market has hurt China's foreign investments as well as reduced demand for Chinese exports. The recently signed 787 billion dollar U.S. stimulus package's buy American steel provisions for domestic infrastructure contracts may mark a start of protectionist economic policies; hurting global trade while exacerbating the recession. If the steel industry lobby was able to insert their interests into the stimulus package, other industries may follow suit and set off a trade war.