China-US relations are at the warmest in years but the atmosphere has been charged of late in view of an emerging trade rift.

The US Commerce Department imposed duties of 28-46% on Chinese televisions in response to intense lobbying from domestic trade groups.

In stark contrast, duties for Malaysian TV sets were set at a symbolic 0.03%.

China's growing economic muscle has irked US manufacturers who feel they have lost out to cheap Chinese imports.

However, China has reacted sharply to the decision with the government speaking up on behalf of the manufacturing community.

Ministry seeks talks

"Sanctions will not solve the problem but on the contrary will damage bilateral relations," foreign ministry spokesman Liu Jianchao said on Tuesday.

Liu said the only way to settle the widening spat was through "negotiation" and "dialogue".

"It's absolutely bad news, as exports to the US account for a very large part of China's television output"

Xu Jun,
China Securities analyst

Analysts said the tariffs would cut into profits since about 30% of China-made sets are sold abroad, and the US is the largest overseas market.

"It's absolutely bad news, as exports to the US account for a very large part of China's television output," said Xu Jun, a China Securities analyst.

For major exporters such as Sichuan Changhong, exports to the US alone represent around 30% of the company's total output.

Markets down

The Chinese stock market also witnessed a slight tremor with investors dumping television stocks on worries that the tariffs may deal an insurmountable blow to many in the fiercely competitive sector.

Sichuan Changhong Electric fell 0.11 yuan to 7.19 (86 US cents), and Konka Group lost 0.05 yuan to 7.14.

TCL Communication Equipment bucked the trend, rising 0.25 yuan to 22.40 on news that its parent has been cleared to increase its stake in the firm.

Trade lawyers in Beijing said they would continue to lobby US lawmakers, but admitted gaining significant changes to the final ruling expected on 12 April was highly unlikely.

Textile quotas

The new duties follow last week's decision by the Bush administration's to impose quotas on some textile imports from China, claiming they were hurting US firms and causing market disruption.

The limits on Chinese imports of bras, dressing gowns and knitwear was taken under a provision of the country's accession agreement to the World Trade Organisation, but fuelled fears of a full scale trade war that could have an impact on global commerce.

Critics of the move accuse Bush of compromising its free trade credentials in favour of political interests ahead of the 2004 presidential election.

At the heart of the dispute are US claims the undervalued Chinese yuan is giving China a trading edge that has undercut US manufacturers and caused Americans to lose jobs, a rationale independent economists have largely dismissed.