NEW YORK, MAY 24 -- President Bush's one-year extension of favorable trading status to China assures no supply disruption or price jumps in imports ranging from cashmere sweaters to teddy bears to portable hair dryers, business people said today.

Moreover, the decision means China won't retaliate by turning elsewhere for some of the most important U.S. exports, including grain, fertilizer, aircraft, cotton and machinery.

''We felt that in the interest of keeping trade lines open and allowing U.S. farm products to flow into China, it was critical that this be extended,'' said Jack King, spokesman for the American Farm Bureau Federation.

The federation was one of many agricultural, trade and business groups that had hoped Bush would grant the "most-favored nation," or MFN, extension to China, despite objections from critics who wanted him to suspend the status as punishment for the Chinese government's year-old crackdown on dissent.

Since relations were first established nearly two decades ago, two-way trade has grown to about $18 billion a year.

Experts in U.S.-Chinese trade estimate that China now provides one-third of the toys sold in this country, 10 percent of the footwear and 15 percent of all imported clothing.

Without MFN status, toys from China would be subject to a 70 percent tariff, versus 6.8 percent now. Tariffs on sweaters would have gone from 6 percent to 60 percent; and hair dryers from 3.9 percent to 35 percent.

One ardent lobby group that pressed for the MFN extension was the U.S. China Business Council, a Washington-based coalition of companies with longstanding investment commitments and operations in China.

The council's own analysis of the U.S.-Chinese commercial relationship showed that if China had lost MFN status, it almost certainly would have retaliated by boycotting American exporters, who sold China nearly $6 billion in goods last year.

Among the biggest U.S. losers would have been wheat growers, whose China sales in 1989 exceeded $1 billion, or about 20 percent of total U.S. exports to that country. Aircraft manufacturers such as Boeing Co. and McDonnell Douglas Corp., which have been selling about $500 million in new equipment to China annually, also likely would have suffered.

Other American businesses that avoided retaliation because of the Bush decision include fertilizer exporters, who sold China more than $250 million worth last year, and cotton growers, who sold nearly $259 million worth.