TICKED BY TARIFFS

Tire spat unlikely to start trade war

WASHINGTON (AP) — China’s complaint Monday over new U.S. tariffs on Chinese tires raised pressure on Washington but isn’t likely to incite a full-blown trade war. Each side knows its economy has too much to lose.

The United States, the world’s largest economy, represents a huge market for Chinese exports. And China is the largest holder of U.S. government debt at a time when the federal deficit has swollen to record levels because of economic rescue measures.

China quickly took its case to the World Trade Organization after President Barack Obama ordered steep increases in U.S. tariffs on Chinese tires for three years, including by 35 percent in the first year.

For China, barriers on its exports to the U.S. mean job losses at home. Still, private economists say they expect both sides to avoid a conflict that would harm producers in each country.

“The big message from China to the United States is think twice, think three times before repeating this kind of relief for a U.S. industry because if you do this again, we are going to hit you again,” said Gary Hufbauer, a trade expert at the Peterson Institute, a Washington think tank.

In a speech Monday in New York, Obama defended his decision to impose the tire tariffs. Chinese imports represented almost 17 percent of the U.S. tire market last year and have been blamed for the loss of thousands of American jobs.

The White House said Obama acted under a provision in the U.S.-Chinese agreement on Beijing’s accession to the World Trade Organization that lets Washington slow the rise of Chinese imports to give time for the American industry to adjust.

In response, Beijing filed a complaint with the WTO, triggering a 60-day process in which the two sides will try to resolve the dispute through negotiations. If that fails, China can ask for a WTO panel to investigate and rule on the case.

In the meantime, the conflict creates a potential irritant as Washington and Beijing prepare for a summit of the Group of 20 leading economies in Pittsburgh on Sept. 24-25 to discuss efforts to end the worst global downturn since the 1930s.

And it adds to a series of disputes over poultry, auto parts and other goods that have threatened to strain relations as Beijing and Washington cooperate on complex issues including the economic crisis, climate control and North Korea.

News of the WTO filing sent Asian markets down 2 percent, but investors appeared to take a less dire view of the dispute as the day wore on. European stock markets declined, but U.S. markets posted modest gains.

Rhetorically, Beijing turned up the heat.

The U.S. tariffs are “a serious case of trade protectionism, which China resolutely opposes,” said a deputy commerce minister, Zhong Shan, quoted by the official Xinhua News Agency.

Tires imported from China are usually low-end models. While American-made, name-brand tires can easily run more than $100 apiece, Chinese imports sometimes sell for half that. The tariffs would make them more expensive.

The two major American tire makers, Goodyear and Cooper, should not be heavily affected. Goodyear says less than 2 percent of the tires it sells in North America come from China. Cooper brings in a higher share from China, but it also sells cheaper tires and stands to benefit from the higher tariffs on the competition.

The U.S. imported about 46 million tires from China last year, three times as many as in 2004. In that time, China’s share of the U.S. market went from less than 5 percent to almost 17 percent.