Trade tensions flare as recovery fades

Goldman Sachs economist, Sven Jari Stehn, estimated that the dollar would need to depreciate about 30 percent over the next five years in order to reach the export target — and that assumes global growth comes in at a healthy 4.5 percent clip.

The International Monetary Fund expects 2010 global growth of 3.9 percent, and 2011 growth of 4.3 percent.

Stehn said if GDP is more like 4 percent, the dollar decline would need to be around 41 percent.

The dollar has been moving in the opposite direction lately, largely because of growing worries over government debt burdens in European countries including Greece, Portugal and Spain that prompted risk-averse investors to sell euros and buy dollars.

The dollar is up some 8 percent against a basket of currencies since early December.

There may be more bad news from Europe this week. Euro zone fourth-quarter GDP figures are due on Friday, and are likely to show growth slowed to 0.3 percent from 0.4 percent in the previous period. In Germany, Europe's biggest economy, fourth-quarter GDP growth is expected to fade to 0.2 percent after advancing 0.7 percent in the third quarter.

Julian Callow, an economist with Barclays Capital in London, said recent euro zone production and demand data have been disappointing, suggesting that first-quarter GDP will also be weak and raising the risk of a double-dip recession.

If Europe is to avoid that, it will need Germany's exports running at full strength, he said.

Europe has also drawn China's attention on trade. Last week, China launched a dispute at the World Trade Organization against European Union (EU) duties on shoes.

With the U.S., Germany and China all looking to export their way to stronger growth, there may be a three-way trade fight brewing.

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