The federal government is spinning its wheels over a trade dispute over cheap foreign bicycles.

Consumers, retailers, and now some Liberal MPs are expressing doubts about a federal trade watchdog's recommendation last month -- that Ottawa slap hefty taxes on foreign bicycles to protect Canadian manufacturers.

Out of every 10 bikes sold in Canada, seven are built abroad, mostly in China. And the flood of cheap imports is threatening to put Canadian bike makers out of business and kill about 500 jobs.

"We're in dangerous waters here in terms of the ability of the companies to carry on," said bicycle industry lawyer Michael Flavell."

So Ottawa has been pondering the recommendation of the Canadian International Trade Tribunal to slap a 30 per cent tariff on imports, which would add about $70 to the cost of a $200 bicycle.

But China's president lobbied against the tariffs on his visit to Canada on Sept. 9, and Liberals seem to be shying away from the tariffs -- even though the jobs at risk are mainly in Quebec.

"I'm a free trader and I would like the adjustments to happen," said Federal Transport Minister Jean Lapierre, conceding, however, that the results could be "painful" for industries here.

There are also fears that tariffs on imported bikes would undermine Canada's case against U.S. tariffs on softwood lumber.

"I'm afraid it will have an impact," said Quebec Liberal MP Francoise Boivin. "The States could (say), what are you crying about when you're doing the same thing?"

The issue is bigger than just bicycles. Canadian makers of barbecues and textiles are also looking for protection, while retailers, like Canadian Tire, are fighting any new tariffs that would drive up prices.

In fact, Canadian Tire filed a request with the Federal Court of Appeal last week, asking it to quash the trade tribunal's Sept. 1 ruling.

Cabinet, meanwhile, is struggling with the decision on whether to protect two factories in vote-rich Quebec and risk angering China, or risk a backlash from voters and the manufacturing sector by doing nothing.

The Conservative party says protecting this country's manufacturers is worth raising the ire of one of Canada's biggest trading partners.

"The government needs to be proactive and take some action to protect and enhance the Canadian manufacturing sector," said Alberta Conservative MP Jim Prentice.

Meanwhile, government sources told CTV News that Liberals are considering other measures, such as quotas on imports, in hopes of protecting Canadian jobs without sparking as much anger from consumers and trading partners.

Prepared with a report by CTV's Roger Smith in Ottawa