NEW YORK (CNNMoney.com) -- As Washington intensifies pressure against China, some manufacturers are concerned about where this latest bout of saber rattling between the two trade superpowers will end up.
The Bush administration, under growing pressure from Congress to reduce the nation's $232.5 billion trade deficit with China, recently announced two significant policy shifts in its trade relations with China.
Last month the government reversed a 23-year-old policy of not applying countervailing duties on cheap goods from non-market countries like China; the first tariffs will be on imports of paper. Then on Tuesday, the United States filed two complaints to the World Trade Organization (WTO) against China over piracy of American products and limited market access to U.S. goods.
These aggressive moves make some manufacturers nervous. "Duties in general will become a tit for tat game," fears Ross Smith, president of Quantum 3D, Inc, a San Jose-based company that manufactures computer systems and software used by aircraft makers, automakers and the defense department.
Said Smith, "If we slap duties on components that we import from China we can fully expect that they will slap duties on assembled value-added systems that we sell there."
"I'm not sure that duties on commodity electronics, should they be applied, are going to help anyone in the U.S. electronics business," he added. "If anything, this will help European electronics manufacturers better compete against us."
Matthew Kazmierczak, spokesman for the non-profit trade group American Electronics Association (AEA), is equally worried.
"Any trade dispute between the U.S. and China is bad for the high-tech industry," Kazmierczak said. "Right now the original dispute is over paper. But what typically happens is that there will be side casualties, and duties will get imposed on other industries."
Yet other American companies say that's a price they're willing to pay in order to level the playing field with China.
"I am believer in free trade, but free also means fair. It means a two-way street," said Steve Fisher, global logistics manager with Calif.-based winemaker Kendall-Jackson, whose winery exports to China.
He expects more pressure will build on the Bush administration to impose what he called "equalizing" trade measures such as countervailing duties.
"I think the situation with tax on paper imports could represent the beginning of a long trade battle with China. Unfair subsidies have no place in a world where free trade rules need to apply equally," Fisher said.
Jo-Anne Daniels, president of the Professional Association of Exporters and Importers (PAEI), agreed with Fisher.
"I think the two actions initiated against China are needed. The Chinese market today is not was it was. Chinese companies don't need the same level of subsidies that they did before," Daniels said.
As expected, the Chinese government criticized both actions and warned that the United States would seriously undermine future trade and economic progress between the two countries.
Daniels' wish? "I'm hoping this situation will work out diplomatically without retaliation."
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