More commercial disputes as economies disengage. punitive duties on Chinese-made tires.

The Coming Trade War With China

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This Monday, the U.S. International Trade Commission, in a 4-2 vote, recommended the imposition of punitive duties on Chinese-made tires. This “Section 421” case now goes to the desk of President Obama. If he gives his OK and the special duties go into effect, some foresee a trade war with China. One analyst, Daniel Ikenson of the Cato Institute in Washington, called the case “High Noon for U.S. Trade Policy.”

Perhaps the confrontation will not be that dramatic—the free-trade community often employs dramatic images in its warnings—but the decision will be consequential nonetheless. For one thing, President Bush turned down all four Section 421 cases sent to him by the Commission. Obama’s acceptance of the panel’s decision, therefore, would mark a change in American trade policy toward Beijing.
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So far, Obama has backed away from the protectionist stands he took during the 2008 campaign. For instance, in a letter released the Wednesday before the election, he stated “massive current account surpluses accumulated by China are directly related to its manipulation of its currency’s value.” Yet in his first semi-annual report to Congress this April, Treasury Secretary Timothy Geithner chose not to brand China a currency manipulator, even though he had overwhelming evidence that Beijing was fixing the value of the renminbi to obtain trade benefits.

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