The U.S. actions ``will be negative for the dollar,'' said Thomas Gallagher, managing director of International Strategy & Investment Group Inc., an economic research firm in Washington. ``Capital usually flows away from countries that engage in bad economic policy like protectionism.''

China's Commerce Ministry said the U.S. was violating free- trade principles. China has postponed a soybean-buying trip to the U.S. because of ``technical problems,'' Foreign Ministry spokesman Liu Jianchao told a press briefing today.

China's decision to back out of the trip triggered a plunge in soybean prices and the biggest decline in wheat futures in eight years. China had been expected to boost soybean imports this year.

`Prices Would Collapse'

``If it's found we're going to lose that export business to China, soybean prices would collapse,'' said Jim Byrne of Byrne Investment Services in Cleveland.

The move against Chinese textiles came a week after the World Trade Organization ruled that steel-import tariffs put in place by the Bush administration in 2002 were illegal. The WTO has also ruled against tax credits the U.S. provides exporters.

China is considering raising tariffs on unspecified U.S. goods, state-run Xinhua news service reported today, citing Ma Xiuhong, vice minister at the Commerce Ministry. Other retaliation may be in store.

``U.S. trade barriers could trigger retaliatory dumping of Treasuries by Chinese officials,'' said Monica Fan, a currency strategist in London at RBC Capital Markets, a unit of Canada's largest bank by assets.

A Treasury report this week showed net foreign purchases of U.S. securities fell to the lowest level in five years, raising concern about the U.S.'s ability to finance the deficit in its current account, the broadest measure of trade and investment.

`Escalation of Rhetoric'

The U.S. decision on textiles drew criticism from Robert Rubin, a former Treasury secretary and now vice chairman of Citigroup Inc., the world's biggest financial services company by market value.

``We are going to see an escalation of rhetoric about trade,'' Rubin said yesterday after a speech to the Council on Foreign Relations in New York. ``There's more of a threat about this than I thought three months ago. Protectionism would be very damaging to us.''

Federal Reserve Chairman Alan Greenspan today warned that protectionism may destabilize the world economy.

``The costs of any new such protectionist initiatives, in the context of wide current account imbalances, could significantly erode the flexibility of the global economy,'' Greenspan said in the text of a speech to a monetary conference. ``It is imperative that creeping protectionism be thwarted and reversed.''

Contracts at Stake

U.S. companies such as Boeing Co. and General Electric Co. risk losing contracts worth billions of dollars if relations between the two countries deteriorate.

``Where we place orders for our next planes would rely not just on commercial considerations, it would also be contingent on relations between our government and the U.S.,'' said Song Chaoyi, a Beijing-based deputy director at State Development and Reform Commission, the country's top planning ministry. ``If the U.S. persists with unfair trade policies, we also might take similar measures to counter them.''

China this month agreed to buy 30 planes from Boeing worth ``more than $1 billion,'' Song said.

U.S. Commerce Secretary Donald Evans this month called on China to open its markets wider and predicted his country's trade deficit with China would reach a record $130 billion this year. Treasury Secretary John Snow earlier said he wants China to end its peg of 8.3 yuan to the dollar and let the currency float to make U.S. exports more competitive.

Dollar Seen Falling

Strategists such as Daniel Katzive at UBS AG in Stamford, Connecticut, said the U.S. currency will continue its decline after the move against China. The dollar has dropped 12 percent against the euro and 8.2 percent against the yen this year.

The dollar fell today in New York against the euro and yen after explosions in Istanbul heightened concern about terrorism. As of 10:06 a.m., the dollar had weakened to $1.1920 per euro from $1.1878 late yesterday. It fell to 108.79 yen from 109.32.

The benchmark 4.25 percent Treasury note maturing in November 2013 rose 5/32, or $1.56 per $1,000 face amount, to 100 9/32 at 8:33 a.m., according to Lehman Brothers. The yield fell 1 basis point to 4.22 percent.

Carl Weinberg, chief economist at High Frequency Economics, a research firm, said the Bush administration had set ``a bad and dangerous precedent'' that would trigger more restrictions.

`Pandora's Box'

``Pandora's box has now been opened, and there is no latch on the lid to keep these pernicious restrictions from being extended,'' Weinberg said.

Evans tried to soothe concerns, saying yesterday during a trade conference in Miami that the 7.5 percent year-on-year growth limit for imports of Chinese textiles was temporary.

``We're more than happy to sit down with them and see if there are other ways to work this out,'' he said.

The U.S. trade deficit with China reached a record $12.7 billion in September. More than 2.6 million manufacturing jobs have been lost since President George W. Bush took office, and groups such as the National Association of Manufacturers have placed some blame on unfair trade practices by China.

James Leonard, deputy assistant secretary of Commerce for textiles and apparel, said the textile quotas weren't protectionist. ``We didn't pull this out of the woodwork,'' he said.

$600 Million in Exports

Leonard said the limits came in response to petitions from the textile industry. The petitions went through a 30-day comment period that included information from the Chinese government. The products affected by the quotas account for only about $600 million of the $11 billion worth of textiles the U.S. imports from China, Leonard said.

Ken Landon, senior currency strategist at Deutsche Bank, said the quotas were a sign the administration was moving away from its strong-dollar policy.

``Because the ultimate protectionist measure is currency depreciation, we believe that yesterday's announcement of new quotas is an important indicator of the true intent of the Bush administration when it comes to dollar policy,'' Landon wrote in his morning research report.