The Obama administration will impose stiff tariffs on imports of Chinese-made tires after finding that a surge of imports has disrupted the U.S. domestic market.
(Wow, you really think Chinese imports have disrupted the U.S. domestic market?)
President Barack Obama signed an order on Friday to impose the special punitive tariffs for three years. This action is the first major trade enforcement action of his administration and comes less than two weeks before the high-profile summit of the leaders of the "Group of 20" nations, including China.
This is the first time the U.S. government has imposed a special "safeguard" provision to protect a U.S. industry from Chinese competition.
"The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," notes White House spokesman Robert Gibbs said in a statement.
Taking effect in fifteen days, the tariff will be 35% in its first year, falling to 30% in the second year and 25% in the third. These tariffs will be on top of the current 4% tariff.
U.S. imports of Chinese tires have risen, almost tripled, from 14.6 million in 2004 to 46 million last year; about one-sixth of the U.S. market. Four U.S. tire plants have closed in the past two years alone, and more than 5,000 domestic workers have lost their jobs.
The United Steelworkers Union had complained to the U.S. International Trade Commission about the disruption. The ITC had originally recommended a stiffer 55% tariff for the first year, 45% the second and 35% the third. And of course, the Chinese government objected to the tariffs entirely.
China claims these duties would be a violation of global free-trade principles and a clear sign of U.S. protectionism, a topic Obama too has spoken-out strongly against.
"This administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers," says U.S. Trade Representative Ron Kirk. Further, "Enforcing trade laws is key to maintaining an open and free trading system."
Kirk also notes that China had agreed its trading partners could impose such sanctions when it entered the World Trade Organization.
Ponder and discuss. This could get interesting. Obama needs to placate the domestic labor unions for his reformed healthcare agenda, yet needs China's support, notably in nuclear standoffs with Iran and North Korea. Lest we not forget, China is the world's third largest economy and a veto-holding member of the UN Security Council. Oh, and what about the massive amounts of U.S. Treasury debt China currently holds?
Personally, I see the makings of a trade war, among other things. With much at stake. Trade aside.