China-US trade war? Obama treads where Bush refused to go

US PRESIDENT Barack Obama has decided to impose a 35 per cent tariff on cheap Chinese tyres from September 26, potentially sparking a trade war, reports London's Financial times.

Next year the tariff would decline to 30 per cent and 25 per cent in the third year, under a 2000 China-specific law that authorises trade "safeguards if Chinese imports "unfairly" undermine American workers and producers, reports the Washington Post. While China agreed to law while negotiating its own WTO entry, it has never been invoked until now.

China has since announced that it will investigate dumping allegations made against US auto and chicken producers, specifically American companies selling products in China below cost or benefiting from export subsidies, reports Bloomberg.

Commerce Minister Chen Deming condemned the decision. "Not only does it violate WTO rules, it contravenes commitments the United States government made at the [April] G20 financial summit," he said,

The US warned Beijing against retaliatory action. "The United States acted within trade laws and the safeguard provision China itself agreed to," said US Trade Representative official, reported the Washington Post.

Mr Obama's decision marks a change from Bush administration policy, which rejected four similar appeals. The presidential decision comes at a time when the G20 is to meet in Pittsburgh later this month to discuss reductions in trade tensions.

Beijing, Chinese manufacturers and US tyre importers, as well as American tyre makers with plants overseas, have objected to the measure, reports The Associated Press.

"US tyre manufacturers years ago decided to move production of low end tyres off-shore," said David Spooner, a lawyer representing the Chinese tire industry. "Frankly, a temporary tariff is not going to get them to change their business plan."

More than 5,000 jobs have been lost over the last five years in the US tyre industry as Chinese sales volumes tripled.

During the campaign, Mr Obama had pledged to "crack down on China" and "work to ensure that China is no longer given a free pass to undermine US workers".

(Source: www.schednet.com)