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US tariff decision on Chinese tires comes at huge price

(Xinhua)
Updated: 2009-09-12 20:05

BEIJING: US President Barack Obama decided Friday to impose punitive tariffs on all car and light truck tires coming from China, raising speculation of surging American trade protectionism and potential damage to US-China trade relations.

Obama's decision came amidst enormous pressure from the United Steelworkers and other unions, which claim that tires imported from China have cost at least 5,000 American workers their jobs.

However, the stiff tariff, which will ultimately raise tire prices in the US, could affect 100,000 tire-related jobs in America, including such sectors as imports, distribution and retail.

The US International Trade Commission, which ruled that a rising tide of Chinese tires into the US hurts American producers, recommended a 55-percent tariff in the first year, 45 percent in the second year and 35 percent in the third year.

Obama settled on slightly lower penalties -- an extra 35 percent in the first year, 30 percent in the second and 25 percent in the third, said White House press secretary Robert Gibbs.

Locally, tire supplies have already been affected.

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Phillip Nussbaum, president of A to Z Tire in Amarillo, Texas, told ProNews 7 that many suppliers have delayed receiving shipments from China for fear that their products would be no longer competitive due to the tariff.

The biggest hit would be felt by American consumers who now buy50-dollar Chinese-made tires and can't afford US brands that cost as much as 150 dollars, many distributors warned.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, D.C., said Obama may have bowed to the pressure to placate the unions and pro-labor Democrats important to the passage of his deadlocked health care reforms.

It is a huge regret that crucial China-US trade relations are once again disrupted by political disputes in the United States.

The biggest price may be the wrong message the US government sent across a world that is still struggling to combat the worst economic recession in decades despite early signs of recovery.

Many countries have suggested that the United States talks tough against protectionism only when its own industries are not threatened. US rhetoric on free trade has already been in doubt due to a "Buy American" provision in the US stimulus package.

Vic DeIorio, executive vice president of GITI Tire, the largest tire manufacturer in China, said the US government has jeopardized its image as a supporter of free trade by taking "this unprecedented action."

"The Obama administration is now at odds with its own public statements about refraining from increasing tariffs above current levels," DeIorio said.

The president may face even stronger pressure at the economic summit of the Group of 20 leading rich and developing nations in Pittsburg on Sept. 24-25. That's because at the summit the leaders are expected to reaffirm their commitment to anti-economic crisis measures.

To generate jobs and restore the economic health, US trade policy must focus on cooperation rather than confrontation with its trading partners, said Patrick Rossenstie, executive director of the US Trade Alliance to Promote Prosperity.

The American government has to draw a lesson from the Great Depression in the 1930s when it imposed heavy import tariffs, a move that triggered a global trade war and exacerbated the crisis.

Seventy years on, smarter actions are required to prevent a repeat of that painful history. The latest US decision was not one of them.