The aggrieved parties are: the United Steelworkers and the U.S. government on one side, Chinese tire companies and the Chinese government on the other. The issues are, as always, jobs and money. The Steelworkers brought a case against Chinese tire companies for dumping tires on the U.S. market over the past few years and in the process putting more than 5,000 people out of work and closing seven domestic tire factories. The case was ruled on by the U.S. International Trade Commission, which found in favor of the Steelworkers. In response, the current administration plastered a 35% tax on Chinese passenger car and light truck tires.
Naturally, the Chinese are miffed, to say the least. They feel the tariff is contrary to World Trade Organization rules and President Obama's rhetoric on current tariff levels, as well as being a tactic of undue protectionism. When China entered the WTO, the U.S. specifically negotiated the right to protect itself against a sudden wave of Chinese goods, and the ITC feels that China's share of the tire market having grown 14% in four years, with 31 million more tires entering, is just such an occasion.
Politics could be the decider in this one, however. China can complain to the WTO, attempt to impose its own countermeasures, or at the upcoming G-20 meeting it can simply whisper in Obama's ear, "You know that $1.56-trillion-and-counting deficit you guys need floated..." Nobody wins in the case of escalation, but we have a feeling the fight isn't yet finished.
[Source: Wall Street Journal | Photo: Mark Ralston/AFP/Getty Images]