China’s new economic stimulus program has ratcheted up trade tensions. Following on the heels of President Barack Obama’s stimulus plan that favors U.S. supply chains, Beijing has issued its own “buy Chinese” policy. Is the world verging on a new era of protectionism, or trade war?

Nine Chinese government departments have jointly released an edict that all government stimulus projects must use only Chinese-made products or services, unless such products or services are not available within the country. The official Chinese order was dated June 1, but reported only this week by state media. To use foreign goods, special permission will be required. Government officials also said they were beginning to investigate complaints that local governments have been favoring foreign suppliers in procurement related to the country’s $585 billion stimulus plan.

Beijing’s “buy Chinese” clause came as a shock to some, since just a few months ago China vehemently criticized Washington’s “buy American” clause in its stimulus package. At that time, China’s premier state news agency called the U.S. plan “poison” to efforts to prop up the global economy. It seems China may be sending a message to Washington that trade barriers can work both ways.

Either way, China has upped the ante in what appears to have become a tit-for-tat escalation in trade tensions.

“The edict will spur protectionist sentiment and is at odds with worries about the country’s export sector,” warned Ben Simpfendorfer, an economist with the Royal Bank of Scotland in Hong Kong.

Joerg Wuttke, president of the European Union Chamber of Commerce in China, was quoted by China Economic Weekly as saying Beijing now “seems to have readily wiped foreign providers out” of the stimulus package.

Many countries were desperately hoping that Chinese stimulus money would filter out to help save their economies. Those hopes have been dashed. Now it remains to be seen if other countries will follow China and set up their own trade barriers to help “stimulate” their own industry.

According to Yao Jian, a Chinese Commerce Ministry spokesman, the protectionist snowball may already be rolling. He told reporters that more than one country had “raised clauses to prioritize the purchase of products of their own countries in their economic stimulus packages.”

International trade relations could soon reach a boiling point.

The great fear in all of the posturing and threats about tariffs and trade barriers is that U.S. and international legislation will be enacted similar to America’s short-sighted and isolationist Smoot-Hawley Tariff Act of 1930, which established a protectionist tariff regime. It is widely believed that this act and similar measures in other major trading countries, including Germany and the United Kingdom, strangled world trade, greatly intensifying the Great Depression and helping create the global economic conditions that led up to World War ii.

Economic depression is here. Trade war is heating up. Is it possible that hot war will be next?