The Office of the United States Trade Representative announced that it is imposing huge tariffs on Chinese tire imports. This move is certain to cause friction between the two countries. Already, Chinese officials have called the move protectionist and threatened similar penalties on US exports.
The International Trade Commission had determined that China had produced products similar to tires made in the US and sold them at prices low enough to force some US plants to close.
Trade representative Ron Kirk stated that "The three-year remedies, consisting of an additional tariff of 35 percent ad valorem in the first year, 30 percent ad valorem in the second, and 25 percent ad valorem in the third year, are being imposed after a finding by the United States International Trade Commission that a harmful surge of imports of Chinese tires disrupted the U.S. market for those products."
According to MarketWatch, "It is the first time the U.S. government has imposed special 'safeguard' provisions to protect a U.S. industry from Chinese competition." The question is whether it will be the last time.
With the effects of the recession in the US still very grave and unemployment continuing to rise, the temptation to try to identify unfair trade practices is high.
Of course, the tire tariff is likely to provide a positive political windfall for the Obama Administration. There have been suspicions for years that the Chinese take advantage of their low labor costs to manufacture goods and ship them to the US in order to gain market share in the world's largest consumer market. Big Labor and many members of Congress will be heartened by the action.
On the other side of the coin, China may view the US action as a form of aggressive protectionism which could set off a series of trade disputes.
Douglas A. McIntyre is an editor at 24/7 Wall St.