The Bush administration, confronting intense pressure to tackle soaring trade deficits, has decided to impose economic sanctions against China to protect American paper producers from unfair Chinese government subsidies. The U.S. Commerce Department, overturning more than two decades of practice, decided to charge new duties on imports from China to compensate for Chinese subsidies to exporters. The decision has marked a major shift in US policy, which had been in intense discussion the action. The new duty applies initially to imports of coated paper from China. However, it will also open the avenue for steel companies, textile producers and other manufacturers facing competition from China to apply for the same protection. US Commerce Secretary Carlos Gutierrez announced on Friday that it was slapping duties of 10.9 percent to 20.35 percent on imports of coated paper from China. The extra duties will be imposed immediately on a preliminary basis pending for further review in coming months to set the final penalty margin. The case, which was brought by NewPage of Dayton, Ohio, is being closely observed by a number of other U.S. industries from steel to furniture. The U.S. trade deficit with China that hit a record $233 billion last year, has encouraged demands for a tougher answer to Chinese government subsidies, which many U.S. lawmakers believe fuel that country’s exports. And the counter action required the Commerce Department to reverse, so far just for China, its policy that originated during the Cold War against applying countervailing duties on subsidized goods from non-market economies. China is the second-largest U.S. trading partner after Canada and holds more than $400 billion of U.S. debt. Reacting to the development Beijing has demanded on that the United States reverse its decision to slap anti-subsidy duties on imports of glossy paper from China. In an official statement from the Chinese commerce department said, ‘The Chinese side strongly demands the United States to reconsider this decision and correct it as soon as possible. This action by the US side goes against the consensus reached between leaders of the two countries to resolve contradictions through dialogue’. The statement further outlined that China would closely watch developments and reserve the right to protect its legitimate interests and rights. Following these developments U.S. stocks fell on Friday, the final day of a turbulent quarter, amid rising concerns that Beijing may retaliate and the dispute could hurt U.S. exporters. The US market are now concentrating on China to see their reaction, and then deciding their future course accordingly. However, a business dispute with China would hurt U.S. exports by making them cost more in foreign markets, while imports to the U.S. would be more expensive, adding to inflationary pressures.