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How Obama’s Tariff on Tires escalate China-U.S. trade Frictions?

By Amarendra Bhushan for CEOWORLD Magazine Updated:September 14, 2009

The Obama Administration will impose new import tariffs on tires from China, Beijing announced it was launching anti-dumping and anti-subsidy investigations targeting U.S. poultry and American-made cars.

The commerce ministry said in a statement it would look into complaints from Chinese manufacturers that US auto and chicken products entered the Chinese market via unfair trading methods involving dumping and subsidies, which harmed domestic industries.

On Friday night, the administration of US President Barack Obama decided to back the complaint from the Steelworkers of America and to impose tariffs on Chinese tire exports at 35 percent for the first year, 30 percent in the second and 25 percent in the third.

China strongly opposed the US decision, regarding it as serious trade protectionism, and Ministry of Commerce spokesman Yao Jian said China would reserve all rights to take responsive action to protect the interests of Chinese companies.

China and the US banned each others’ poultry in 2004 following an outbreak of bird flu in Asia. But China lifted the ban after a few months and has complained that the US refused to do the same.

Since then, China has imported more than 4 million tons of US poultry.

While the two economies desperately need each other — China relies on exports to the U.S. to drive growth while the U.S. requires investments from China to finance its giant deficits.

Companies that export their products to China like Caterpillar oppose the tariffs because they fear further investigations and retaliation from Beijing will follow. General Motors and Ford have also joined the chorus of critics, arguing that price tags on new cars and trucks could inflate by as much as $150.

Many in the United States are also critical of the tire tariff, with some worried it will hurt American consumers. Chinese tires make up 17 percent of the market, and most are lower-end tires that retailers may have a hard time buying elsewhere.

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