China fired back against proposed tariffs on Chinese tires imported to the United States by announcing Sunday that an anti-dumping and anti-subsidies investigation would be launched on U.S. auto parts and chicken products, state media reported.
The move could signal the start of more trade tensions between the massive trade partners at a time when the two economic powers are expected to lead the globe out of the financial crisis.
"This case is perceived as a turning point in U.S.-China relations and likely to represent a trend toward subtle, if not overt, forms of protectionism from both sides," said James Zimmerman, a partner in the law firm of Squire Sanders & Dempsey in Beijing.
"American business in China should be prepared for what might be a zealous retaliatory response from China, which might impact a broad range of U.S. commercial interests," he said.
At the urging of the U.S. International Trade Commission, President Obama announced Friday that he would impose a 35% duty on automobile and light-truck tires imported from China.
The federal agency, acting on an appeal from the United Steelworkers union, found that a surge of Chinese tires had disrupted the U.S. market and cost thousands of U.S. jobs.
Obama's decision was a major victory for U.S. labor unions but was opposed by myriad U.S. business groups, including leading tire manufacturers and agricultural groups that rely on the Chinese market.
Chinese officials lambasted the decision, accusing the U.S. of engaging in protectionism and violating World Trade Organization rules. They argued that the U.S. tire industry had long ago abandoned the low-end market that China covets and said Chinese tire imports had increased only 2.2% between 2007 and 2008, state media reported.
By announcing the probe of U.S. imports, the Chinese Ministry of Commerce signaled that it was prepared to challenge Obama's decision.
"Recently, the commerce ministry has received word from domestic industries indicating that [chicken and auto] products had entered our nation's markets via dumping, subsidies and other unfair trade means," the ministry said on its website, giving no details about the specific products.
The U.S. exported $1 billion worth of auto products to China in the first six months of this year, up 9.1% from the same time last year, state media said.
U.S. agriculture groups had written Obama opposing the tariff, saying the China market was the difference between being profitable and unprofitable for many.
When China joined the WTO in 2001, it agreed to safeguards that allowed the U.S. to impose duties if it was determined that a surge in Chinese imports threatened U.S. producers and caused a market disruption.
The United Steelworkers estimated that 4,000 to 5,000 U.S. tire manufacturing jobs have been lost since 2004 as a result of Chinese imports.
State media said an estimated 100,000 Chinese jobs and $1 billion in exports could be lost because of the tariffs, which would begin Sept. 26.
"It was a misuse of the special safeguard measures and sent a wrong signal to the world," Chen Deming, China's minister of commerce, said Saturday.
Experts say China could redirect its tires to another country, which might also feel inclined to impose duties.