Business, Finance & Economics

US-China: Hints of a trade war?


A model relaxes her foot beside a Buick during the Auto China 2008 show April 20, 2008 in Beijing, China.


Feng Li

This is not what the fragile global economy needs right now. And it's certainly not what fragile Detroit needs, either. 

China's Commerce Ministry today said that it is imposing tariffs on large cars and SUVs exported from the United States.

Those duties could be as much as 22 percent, Reuters reported. And they will be tacked on to an existing 25 percent tariff that's imposed on US auto exports in China.

Reaction by US lawmakers has been, not surprisingly, swift:

"China relentlessly breaks international trade rules and seeks to gain an anti-competitive advantage over our companies and workers. America must be equally relentless in fighting back," said Sen. Debbie Stabenow, who represents Michigan.

Stabenow wants the USTR to take action. Four US House of Representative members agree, and called Beijing's move "unjustifiable" and "one more instance of impermissible Chinese retaliation against the United States and other trading partners," according to Reuters.

This latest trade mash-up comes at a particularly bad time for Detroit as US automakers have been aggressively targeting China, the world's biggest market for autos.

More from Thomas Mucha: Can China save General Motors?

But auto sales in China have slowed dramatically, so Beijing is stepping in to protect its homegrown industry.

“The move shows that China is always capable of intervening politically in its markets,” Urgent Pepper, an analyst with Bankhaus Metzler told Bloomberg. “The automobile industry is very dependent on China for growth, and there's doubts about the pace of future expansion.”

Today's spat is also part of a longer-running auto trade fight between the world's two largest economies.

In 2009, President Obama slapped tariffs of up to 35 percent on Chinese-made tires. In September, the World Trade Organization ruled that those tariffs were legal, despite China's objections. 

So today's announcement in Beijing has a whiff of tit-for-tat about it. 

But a full-blown trade war between these two key engines of the global economy — however unlikely — wouldn't only be a disaster for Detroit.

It would spell serious economic trouble for just about everyone.