Despite the recent imposition of steep tariffs of Chinese tires by the Obama administration, a trade war between the two countries is unlikely, according to Bloomberg:
China’s imports, up 68 percent in five years, now amount to almost one-third of gross domestic product, according to World Bank data. The nation’s demand for foreign products is a boon for American companies, which exported $351 billion to China in the past five years.
U.S. President Barack Obama’s 35 percent tariff on tires from China spurred a Chinese investigation into prices of U.S. poultry and car products. Dangers of further escalation may be mitigated by the increasing benefit China provides the world economy. Poised to surpass Japan as No. 2 in GDP, its purchasing power is a lure to firms seeking new customers.
Read also an editorial from the Washington Post:
In the name of protecting jobs in the U.S. tire industry, the president has effectively imposed a tax on tires for every American — and a particularly regressive tax at that, since the impact will fall most heavily on the cheap tires that China makes and that lower-income Americans buy.
This is not the second coming of the Smoot-Hawley bill, the notorious 1930 tariff act that exacerbated the Great Depression. Mr. Obama acted under authority China itself had acceded to as part of gaining U.S. agreement to its membership in the World Trade Organization. It affects a narrow range of traded goods. And China’s retaliation so far remains within the framework of international trade law. Mr. Obama says that this step will bolster free trade in the long run by showing that the United States intends to enforce trade agreements. That demonstration will, he implies, strengthen public trust in open markets.
The question is: Exactly what is he doing to advance additional market-opening agreements that are clearly in the U.S. interest, such as pending deals with Colombia, South Korea and Panama?