Tire tariff dispute unlikely to expand

The United States, the world’s largest economy, represents a huge market for Chinese exports. And China is the largest holder of US 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 Obama ordered steep increases in tariffs on Chinese tires for three years, including a 35 percent increase in the first year.

For China, barriers for its exports to the United States 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 US 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 yesterday in New York, Obama defended his decision to impose the tariffs. Chinese imports represented almost 17 percent of the US 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 US-Chinese agreement on Beijing’s accession to the WTO that lets Washington slow the rise of Chinese imports to give American industry time to adjust.

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

In the meantime, the conflict is 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 and climate control. The United States also wants China’s help in trying to block North Korea and Iran from developing nuclear weapons.

Besides challenging the US tire tariffs before the WTO, Beijing said it would investigate on its own to determine whether the United States is improperly selling auto parts and poultry in China at unfairly low prices - a process that could trigger Chinese tariffs on these products.

The US 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.

Beijing’s response shows the urgency communist leaders attach to maintaining exports, employment, and social stability. Officials have said up to 30 million laborers lost factory jobs last year as exports plummeted. Many have found new employment, but the government is eager to avert more job losses.

Chinese leaders are sensitive to public anger, easily triggered by suggestions that foreign nations are treating China unfairly. Frustration over the tire tariffs has been fanned by news reports citing a rubber industry group that said up to 100,000 jobs could be affected, with losses to Chinese producers topping $1 billion.

But the decision to go through the WTO could reflect China’s desire to confine the dispute and prevent it from disrupting relations with Washington.