Obama to Impose Tariffs on Chinese Tires

china chinese flag tire tires recall generic CBS/AP/iStockphoto

President Barack Obama decided Friday to slap punitive tariffs on all car and light truck tires entering the United States from China in a decision that could anger strategically important China but placate union supporters important to his health care push.

China says it strongly opposes the decision, which it calls protectionism that violates World Trade Organization rules. The Ministry of Commerce says the tariffs set a bad precedent in light of the global economic crisis, and China reserves the right to react.

Mr. Obama had until Sept. 17 - next week - to accept, reject or modify a U.S. International Trade Commission ruling that a rising tide of Chinese tires into the U.S. hurts American producers. A powerful union, United Steelworkers, blames the increase for the loss of thousands of American jobs.

The federal trade panel 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, White House press secretary Robert Gibbs said.

"The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," Gibbs said.

The decision was announced late Friday evening, a time when significant news often gets less attention because of the hour and the upcoming weekend.

The timing was awkward for another reason, coming as U.S. officials are working with the Chinese and other nations to plan an economic summit of the Group of 20 leading rich and developing nations in Pittsburgh, to be held Sept. 24-25. China will be a major presence at the meeting, and the United States will be eager to show it supports free trade.

Many of the nearly two dozen world leaders he will be hosting have made strong statements critical of countries that protect their key industries. Obama, too, has spoken out strongly against protectionism, and other countries will view his decision on tires as a test of that stance.

Governments around the world have suggested the United States talks tough against protectionism only when its own industries are not threatened. U.S. rhetoric on free trade also has been questioned because of a "Buy American" provision in the U.S. stimulus package.

The decision could have ramifications in other high-priority areas, too.

The White House badly needs Chinese help to confront climate change, nuclear standoffs with Iran and North Korea and global economic turmoil. China is the world's third-largest economy and a veto-holding member of the United Nations Security Council.

And Roy Littlefield, executive vice president of the Tire Industry Association, which opposes the tariff, said it would not save American jobs but only cause tire manufacturers to move production to another country with less strict environmental and safety controls, less active unions and lower costs than the United States.

At the same time, Obama needs support from unions - also a key backer of the Democratic Party in elections - as he makes a high-stakes push for national health care legislation.

The steelworkers union brought the original case accusing China of making a recent push to unload more tires ahead of Obama's expected action. The union says more than 5,000 tire workers have lost jobs since 2004, as Chinese tire overwhelmed the U.S. market.

To reach a compromise on health care, Obama may need concessions from pro-labor Democrats who support a strong stand against China.

Obama's action marks a shift from the Bush administration, which was routinely criticized for being too delicate in confronting Beijing's alleged trade violations. Obama promised during his presidential campaign that he would do it differently.

For the Chinese government, the tire dispute threatens an economic relationship crucial to China's economic growth. There was speculation before the decision that new tariffs could produce public pressure on Beijing to retaliate, sparking a dangerous trade war.

Soaring Chinese imports of American chicken meat already have been mentioned by Chinese state media as a possible target. Beijing also could sell some of its extensive holdings of U.S. Treasury debt, which could unsettle markets.
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