No one familiar with the Smoot-Hawley tariff of 1930 should relish the prospect of a trade war with China—but that seems to be where we're headed and probably should be where we're headed. Although the Smoot-Hawley tariff did not cause the Great Depression, it contributed to its severity by provoking widespread retaliation. Confronting China's export subsidies risks a similar tit-for-tat cycle at a time when the global economic recovery is weak. This is a risk, unfortunately, that we need to take.
In a decade, China has gone from a huge, poor nation to an economic colossus. Although its per capita income ($6,600 in 2009) is only one seventh that of the United States ($46,400), the sheer size of its economy gives it a growing global influence. China passed Japan this year as the second-largest national economy. In 2009, it displaced Germany as the biggest exporter and also became the world's largest energy user.