David, I remember in the old days when the United States burped a little bit, the rest of the world reacted big time. Now China raises the interest rate, it burps a little bit and it has a huge impact on what's going on, not only here but around the world. I think it's a sign of the times.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: It sure is. The world is changing in front of our eyes, Wolf.
For most of the years since World War II, the United States has been the locomotive of the world economic growth. We were the engine in the front pulling everyone along. But coming out of the financial crisis, China has displaced us. It's now the locomotive of world growth.
And today, the Chinese engineer slammed the foot on the brake. And when they did that to slow down the locomotive, all of the cars behind, and that included us, they got a real jolt and our markets went down.
BLITZER: You know, look at the numbers. In the second quarter of this year, China's gross domestic product, China's gross domestic product went up 10.3 percent in the second quarter. The U.S. GDP went up 1.7 percent. Wow, what a difference?
GERGEN: Absolutely. And those differences, Wolf, are not only translating to what we saw today, but they're translating to growing economic tensions between China and the United States. We had one more development on that front today.
The "New York Times" has just been reporting on its website that according to three sources, China has retaliated for what we did last Friday. Last Friday, we announced, the U.S. government announced that we were going to investigate their renewable energy industry to see if they were violating world trade rules.
Now they've come back. They were angry about that and apparently, according to these sources, they have slammed restrictions on, they have curbed the shipment to the United States of vital minerals. They're something called rare earths. Not many of us understand them, but they're used for high-tech kind of things, like guided missiles.
They're also used in the renewable energy industry, and China controls 95 percent of this industry. They control 95 percent of this industry and these rare minerals. Most of what we had in the United States has moved to China and here they're using that as a lever against us to retaliate.
And of course, already we've got all these the tensions over currency rates. So these rising tensions between the number one and number two countries -- we're number one in the largest economy, but they're, as those number you just put up, Wolf, illustrated, they're coming up fast.
BLITZER: And they still have nearly a trillion dollars in U.S. T-bills as well. So they have a lot of sway with the U.S.
David, thanks very much.
GERGEN: They're our creditors.
BLITZER: Yes, they certainly are. They have a lot of money right now, the Chinese.
Transcript from The Situation Room Aired October 19,2010