A week and a half in power and the Obama administration has managed to alienate a goodly portion of our trading partners. When the Telegraph headline reads “U.S.-EU Trade War Looms…”, you know that you have seriously stepped on some toes.

The genesis of all of this is the “buy American” provision in the fiscal stimulus bill. Nobody seemed to pick up on this provision as the bill sailed through the House but it certainly didn’t fly under the radar for long. The Europeans have noticed and they are hopping mad.

The EU trade commissioner vowed to fight back after the bill passed in the House of Representatives late on Wednesday included a ban on most purchases of foreign steel and iron used in infrastructure projects.

The Senate’s version of the legislation, which will be debated early next week, goes even further, requiring that any projects related to the stimulus use only American-made equipment and goods.

The inclusion of protectionist measures has quickly raised hackles in Europe.

Catherine Ashton, the EU trade commissioner, said: “We are looking at the situation. The one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore.”

If you read this blog much at all, you will have seen my concerns about something like this developing. The first misstep (in my opinion) was Geithner’s shot across China’s bow over currency manipulation. Then this pops up. You all know what this sort of action lead to during the Great Depression. You don’t need me to go over that ground again. We already have seen a virtual collapse of world trade due to the economic situation. If we layer trade restrictions on top then it could become catastrophic.

How the Democrats extricate themselves from this is not so important as the fact that they must. It’s been a very long time since it was so vital to maintain relations with Europe and Asia. We are all in this together and it isn’t conceivable that we can all come out of it if we try and do so at another’s expense.

more: here