Obama administration slaps a tire tariff on China: terrific or terrible idea?

By Money Matters Editors

Some say the new U.S. tariff on China’s tires will be terrific while others say it will be terrible. What’s going on here?

The Obama administration has imposed a 35 percent / 30 percent / 25 percent, 3-year tariff on passenger vehicle and light truck tires from China, arguing that China’s current monetary and economic policies ‘artificially depress’ the cost of China-made tires exported to the U.S., hurting U.S. tire manufacturer sales, resulting in lost jobs. China’s share of the U.S. tire market has risen to 16.7 percent in 2008 from 4.7 percent in 2004.

China, conversely, says it’s doing nothing wrong and will defend its position. China also accused the U.S. of protectionism, or establishing a tax designed to restrict imports into the U.S. “The Chinese government will continue to uphold the legitimate interests of China's domestic industry and has the right to take corresponding measures," Chen Deming, China’s minister of commerce, told the Associated Press.

President Obama’s political base includes organized labor, and Obama was under pressure to impose a tariff from the United Steelworkers union. The union, which represents about 30,000 tire production workers, had filed a complaint with U.S. International Trade Commission.