A good old-fashioned trade war may be heating up between the US and China with the Administration firing the first shot. A number of global think tanks have worried that the recession could cause protectionist actions. China’s economy has come out of the downturn more quickly than expected. US growth is expected to be very modest for the next year. China has low cost factories and the US does not.
Under the circumstances, labor unions and many members of Congress expect the Administration to do what it can to prevent trade practices that might cost Americans job.
The Administration has levied huge import tariffs on Chinese tires claiming that they are exported to the US in a manner which damages the American tire industry unfairly.
Following an announcement by the White House, United States Trade Representative Ron Kirk said the U.S. would impose remedies under Section 421 of the 1974 Trade Act to stop a harmful surge of imports into the U.S. of Chinese tires for passenger cars and light trucks. Following what the ITC determined was a surge, production of similar products in the U.S. dropped, domestic tire plants closed, and Americans lost their jobs.
The agency posted the following penalties: 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.
President Obama announced that Trade Adjustment Assistance will be targeted to help affected workers, industries, and communities immediately, while tariff changes take effect.
“When China came in to the WTO, the U.S. negotiated the ability to impose remedies in situations just like this one,” said Kirk. “This Administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers. Enforcing trade laws is key to maintaining an open and free trading system.”
This will get ugly.
Douglas A. McIntyre