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This didn’t take long. Late Friday President Obama imposed punitive tariffs on Chinese-made lower price tires and by Sunday China had announced it was considering tit-for-tat tariffs on imports of U.S. chicken and auto products.
It’s hard to see this as anything other than Obama currying favor with organized labor and Rust Belt Democrats at a critical point in his drive for health-care reform. The United Steel Workers had sought the tariff, saying 5,000 jobs had been lost in the industry since 2005. But U.S. tire makers had opposed it. They had largely gotten out of the low-end market and both Goodyear and Cooper make tires in China for sale in the United States.
The White House, for its part, insists that it is only enforcing trade laws already on the book. The particular part of the trade law, unused until now, was enacted as part of China’s entry into the World Trade Organization and is intended to protect U.S. industries from a sudden surge of Chinese imports, giving them time to regroup and compete.
The Obama ruling calls for three years of tariffs — a 35-percent tariff in the first year, 30-percent in the second and 25-percent in the third. The union and its allies had asked for tariffs beginning at 55 percent.
The cost of the tariffs will be born by U.S. shoppers looking for bargain-priced tires and, potentially, by U.S. producers of poultry and auto parts. The Chinese claim, rather sweepingly, that they too will be hurt by the tariffs, losing 100,000 jobs and $1 billion in exports.
Trade issues — here and in China — are hardly immune to domestic political considerations and are subject to considerable poker playing by trade negotiators. The tire tariffs will surely come up at the G-20 meeting in Pittsburgh later this month when Obama meets with Chinese President Hu Jintao. Commercial relations between the United States and China are too important to allow a trade dispute to escalate into a trade war.