Economist warns of US and China trade war

Economist Roger Bootle has warned that the trade gap between the US and China could spark a dispute between the two countries.

Bootle, managing director of Capital Economics, warned that the US would not tolerate the continued trade imbalance with China and would push the county to revalue the renminbi, sparking a trade dispute.

'There is going to be some sort of bust-up and that could well lead into some kind of a trade war,' he said, speaking at the Personal Financial Society annual conference.

Bootle dismissed the Chinese move to allow the renminbi to rise earlier this summer as a token gesture.

'The Chinese have been playing games with us. They have pretended to make a change but not really and assumed we would not notice. American patience is running out,' he said.

'I'm hoping the two get together and...negotiate some sort of trade agreement and allow the value of the renminbi to rise and the Chinese to expand domestic demand.'

Bootle warned the continued saving and trade imbalance between the developed world and emerging Asia was a major problem for the global economy.

'The borrowing that has caused so many problems in the West can be directly attributed to the trade surplus in Asia, the oil producers and Germany and Norway in Europe,' he said.

'What the world needs is for the surplus countries to pull their weight in regards to the generation of demand. Then the debtor nations of the world, which includes us, can sort out their finances against a stronger backdrop,' he added.

Bootle echoed the warnings of other economists that Greece could default and exit the euro within the next five years.