High frictions after US tire tariff

• Source: caijing.com.cn
• [13:07 September 17 2009]
• Comments

A United States decision to impose special duties on Chinese tires has triggered a swift response from China's Ministry of Commerce, which said on Sept. 14 it would request World Trade Organization (WTO) consultations with the US over the duties.

China believes that the US tire tariff is an abuse of safeguard measures and sends the wrong message to the world on spread of the global financial crisis, the ministry's spokesman Yao Jian told reporters Sept. 15.

US president Barack Obama imposed punitive tariffs on all car and light truck tires imported from China in the next three years – an increase of 35 percent the first year, 30 percent in the second and 25 percent in the third.

An Updated Look at the Tire Industry

Official data provided by China's commerce ministry suggests that there hasn't been a significant increase in Chinese tires entering the American market- Chinese tire imports to the United States in the first half of 2009 were down 16 percent year-on-year, prior to only rising by 2.2 percent between 2007 and 2008. Chinese tire exporters will lose their position in the U.S. market, which the China Rubber Industry Association estimates will have an impact of almost 100,000 jobs. American tire producers, the Tire Industry Association and the American Coalition for Free Trade in Tires do not believe that Chinese tire imports have had an adverse effect on the American tire industry.

The United Steelworkers union filed the trade case against Chinese imports on April 20. The US International Trade Commission ruled that a rising tide of Chinese tires into the US hurt American producers, recommending a 55 percent tariff the first year, 45 percent in the second year and 35 percent in the third year. The Obama administration settled on slightly lower penalties, but with an equally heavy-hitting impact– an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third. Representatives from both governments were in agreement that a tariff over 25 percent would result in Chinese tire manufacturers essentially losing the American market.

Zhang Yuqing, a Chinese delegate to the WTO and former official with the Ministry of Commerce, told Caijing that to a large extent Obama's decision is guided by political supplication on the domestic front rather than trade realities. While the Bush administration was routinely criticized for being too delicate in confronting Beijing's alleged trade violations, Obama pledged a different tone during his presidential campaign. The new stance on trade is believed to be a strategy for shoring congressional support on the current health care reform debate.