Late on Friday, September 11, 2009, President Obama announced that he would impose new tariffs on tires imported from China, pursuant to a complaint made by the United Steelworkers (USW) that the imported tires were disrupting the U.S. tire market. China immediately responded by beginning new trade investigations into U.S. imports of automotive parts and chicken, raising concerns about trade tensions between the two countries.
The new tariffs on tires will mark the first time that the United States has imposed remedies under Section 421 of the Trade Act of 1974 with regard to a product from China. Section 421 permits the President to impose trade relief, in the form of tariffs, quotas or other appropriate measures, whenever a surge in imports have been found to cause market disruption in the United States.
While significant, the 35% tariffs are lower than those suggested by the U.S. International Trade Commission, an independent bipartisan executive agency that initially investigated the USW's complaint. The President's determination to impose somewhat lower but still significant tariffs is considered an important indication of the new administration's position on trade policy.
President Bush rejected a number of Section 421 recommendations for trade relief during his administration, and industries suffering from import competition looked to other areas of the law to find relief. The decision is also notable in that the Section 421 complaint on tires was filed by a union, and was largely opposed by U.S. tire companies, who had already relocated a significant portion of their production to China.
President Obama's decision sends signals to the trade community that the Administration intends to apply the trade laws vigorously, although not indiscriminately. Companies that face heavy import competition may now be emboldened to file Section 421 complaints of their own, or to seek other forms of trade relief, such as antidumping and countervailing duties. Interested parties will watch closely to see what impact the President's decision may have on the manner in which the multiple federal agencies that deal with trade policy apply the U.S. trade laws.
China reacted swiftly and strongly to the announcement of the tariffs, alleging that the President's decision is prohibited by World Trade Organization (WTO) trade rules and calling for consultations on the matter. At the same time, China announced investigations into whether U.S. exports of automobiles and poultry are being subsidized by the U.S. government or otherwise sold unfairly in China. While China has stated that the new investigations are not retaliatory, their timing may indicate otherwise, underscoring China's concern about the Section 421 result.
More information on the President's decision to impose tariffs can be found here.