The US and the EU were being drawn ever closer into a trade war on Wednesday after senior US congressman issued a blunt warning to the EU over its plans to lift a 15-year-old arms embargo on China.
Talking explicitly about how it would retaliate for the first time, Senator Richard Lugar, the powerful Republican head of the Senate Foreign Relations Committee, warned that the US would stop sales of military technology to Europe.
His Democratic counterpart, Senator Joseph Biden, warned that the lifting of the ban would be "a non-starter with Congress."Their tough words came after a meeting with President George W. Bush in the White House.
Analysts warned the looming row could undo the repairs made to the US-EU relationship by Bush's visit to Europe last month.
"Europe can do defense trade with China or it can do defense trade with the US. It can't do both," said Daniel Goure, a Pentagon consultant and a vice president of the Lexington Institute, a military think tank.
European leaders hope to lift the arms embargo when the EU holds a meeting with the Chinese leadership in early May.
Europe is hoping to persuade Congress to accept the decision by arguing that the embargo was a response to Tiananmen Square massacre in 1989, and that China has moved on dramatically since then.
During his European tour, Bush indicated he was open-minded about the issue, but he warned that the EU would have to convince Congress. However, speaking outside the White House, Lugar and Biden gave no sign they were under pressure from Bush to adopt a more conciliatory approach.
The EU commission on Wednesday tried to strike a conciliatory tone.
"It is not our intention that this change will increase the quantity or the quality of arms exports to China," a spokeswoman said.
"Neither is it our intention to do anything to upset the military equilibrium in Southeast Asia. There are concerns in America about high technology transfer. We have made it clear that we want to talk to them about this," she said.
The Pentagon is increasingly concerned over a ambitious Chinese military build-up which its experts believe is aimed at threatening Taiwan. The US is committed to Taiwan's defense.
"Balance in the Taiwan straits is delicate enough that European military trade with China could tip it," Goure said.
He said Beijing was acquiring up to 600 advanced Russian fighter jets, Mig-31s and Mig-35s and had bought modern Russian destroyers and submarines. But the US was most worried about sales of advanced European communications and sensor systems, like fiber optics, infra-red, sonar and radar scanners.
According to the New York Times, recent US intelligence pictures have painted an even more worrying picture of the Chinese build-up.
Philip Gordon, an expert on transatlantic relations at the Brookings Institution in Washington, outlined a possible compromise involving strict controls and links between the lifting of the embargo and China's human rights performance.