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Scarcely a day passed last week that Washington didn't hurl another thunderbolt at Beijing, threatening to escalate a rancorous trade row between the world's top consumer, the U.S., and its most important supplier, China. The U.S. Commerce Department threw the first by imposing new quotas on Chinese textile imports. U.S. Treasury Secretary John Snow then threatened to brand China a currency manipulator if it didn't take steps to let the yuan appreciate to stem a flood of Chinese manufactured goods, in the meantime naming a special envoy to negotiate with China. Beijing fired back. Premier Wen Jiabao warned against U.S. meddling, calling currency reform a matter of "China's sovereignty." Commerce Minister Bo Xilai denounced U.S. trade sanctions, saying they are "in violation of the [World Trade Organization] principle of free and fair trade." Then, Beijing blinked. China announced it would voluntarily curb garment and textile exports by imposing substantially higher tariffs on 74 types of products, thus preserving "an orderly and free international trade environment," a spokesman for the Trade Ministry said.

So is this the trade war that wasn't? More likely it was an opening skirmish. China's soaring trade surplus with the U.S. reached a record $162 billion last year, and this year it could top $200 billion. The voluntary tariffs will add about 10¢ (the current tariff is about 2.5¢) to the price of Chinese-made apparel such as underwear and blouses. But with the volume of some Chinese exports to the U.S. and Europe increasing by 500% in recent months, the concession may do little to ease the trade gap. Neither will it appease American politicians from areas where blue-collar voters are worried that they are losing their factory jobs to China.

U.S. politicians may find blaming China an easy sell back home. But just because China is running a large trade surplus with the U.S. doesn't mean its practices are unfair. China's overall trade ledger with the world has been nearly balanced over the past decade, and the country has generally kept the promises it made when it joined the WTO in 2001. In fact, wholly Chinese-owned companies don't export very much. Last year, 57% of everything China shipped abroad was forklifted out of companies that are partially owned by foreigners, mostly big multinationals that have set up shop in the Middle Kingdom to take advantage of lower manufacturing costs there. Higher up the value chain, 65% of technology exports came from foreign-owned firms operating on the mainland. The workers are Chinese, but the profits go overseas. Yet that hasn't stopped the U.S. from accusing China of cheating.

Washington has leveled two charges against China. The first is that China's textile exports to the U.S. have surged this year. They have, because on Jan. 1 a global trade agreement that essentially divided up the clothing business through an import quota system was scrapped. Countries had a decade to prepare for competitive imports, but most did virtually nothing. Small surprise, then, that more Chinese silk blouses now hang on Wal-Mart's racks. But WTO rules allow nations to impose emergency restrictions if trade flows surge disruptively. Washington did that last week. The European Union, which also fears its textile sector will be decimated by the inflow of cheaper Chinese goods, has stopped short of sanctions, preferring to negotiate a solution with Beijing.

The second U.S. grievance is that China, by pegging its currency at about 8.3 yuan to the dollar, maintains an unfair competitive advantage. But the decade-old peg has hurt China too. During the Asian financial crisis of 1997, China's yuan was overvalued, making Chinese products artificially expensive abroad. With the value of the dollar now falling, the yuan seems comparatively undervalued, although there is no universal agreement on this. Many analysts think Beijing does plan to repeg the yuan to a basket of currencies, probably this year, and let the value rise within a narrow band. Doing so will placate Washington, but will it help America's trade balance? Federal Reserve Chairman Alan Greenspan doesn't think so. "It does not follow," he said last Friday, that a rising yuan "will lower our overall trade balance." Greenspan says American retailers would simply switch to other countries to get similar products—and the trade deficit would go on rising.

The U.S., which also has a soaring budget deficit, could help itself by exercising some fiscal restraint. But the U.S. Congress may not be swayed by such economic arguments. Last month, the Senate endorsed a measure that would impose a punitive 27.5% tariff on all Chinese imports if Beijing failed to change its currency policies. Although the American Chamber of Commerce in China said the mainland's decision to voluntarily limit apparel and textile exports was a sign that "the U.S. and China may be able to resolve other trade differences with a similar sense of moderation," some Washington lawmakers may find the tariffs are not enough. The forecast calls for more thunderbolts.

• Matthew Forney/Beijing
• The Gloves are off in U.S.-China trade spat