A U.S decision to impose special duties on Chinese tires has increased trade tensions between the two countries.

China labeled the U.S action as trade protectionism,arguing that the new tariff is in breach of WTO rules. The Chinese Government also said that the decision will not only hurt Sino-U.S. trade relations but may also impact on the pace of the global economic recovery.

Meanwhile, China has announced its own anti-dumping investigations in to chicken products and automotive goods imported from the United States.

On September 11, the American president announced his decision to impose additional duties on tires imported from China. The new duty of 35 percent adds to an existing 4 percent duty. The special duty will be reduced to 30 percent after one year and then to 25 percent for the final year of the three year period.

Aside from accusing the U.S of trade protectionism, a notice posted to the Chinese Ministry of Commerce's website on September 12th also stated that "the U.S decision to impose special duties on Chinese tires lacks the necessary factual basis" outlining four points:

1. The number of Chinese-produced tires exported to America only increased by 2.2% in 2008 when compared to the year before and the export volume in the first half of? this year actually fell by 16% when compared with the same period last year.

2. Since Chinese tires are mainly targeted at the maintenance/repair market in America and therefore don't compete directly with American-produced tires that are mainly used in the initial production of cars.

3. The U.S tire industry has not been greatly effected by the entry of Chinese-produced tires into the domestic market, even during 2007, when the growth rate of imported Chinese tires was the highest, American companies were still able to perform well and return profit.

4. The fact that American tires companies exited some areas of production, was due to their decision to pursue the high-end market segment and has nothing to do with Chinese imports. Even if America stops importing tires from China, it will have to import them from other countries.

The announcement also claimed that the U.S action risked sparking a "chain reaction of trade protectionist measures that could lead to a slowing of the current pace of the revival in the world economy."

The United Steelworkers Union filed the tire protection petition earlier this year. It said a tripling of Chinese tire imports from 2004 to 2008 has cost more than 5,000 U.S. jobs.

The trade deficit between China and the U.S totaled 103 billion U.S dollar in the first half of 2009, down 13 percent from last year.

President Barack Obama continued to insist that the U.S action was fully consistent with WTO principles. In a speech delivered on Monday, he said: "When, as happened this weekend, we invoke provisions of existing agreements, we do so not to be provocative or to promote self-defeating protectionism, we do so because enforcing trade agreements is part and parcel of maintaining an open and free trading system."

Links and Sources
Ministry of Commerce: Official Response (Chinese)
Whitehouse.gov: Presidential Proclomation