China Strikes Back on Trade

By IAN JOHNSON BEIJING -- China indicated it would restrict U.S. imports of chicken and auto products and demanded trade talks after Washington's move to slap punitive sanctions on Chinese tire imports, raising tensions in ahead of two planned meetings between the countries' leaders. Many observers in China say ties between the nations should remain unharmed, noting that China's measures could limit imports in two areas that it already tightly controls -- and thus might not have a huge effect on U.S. exports. But the measures add to worries about trade protectionism amid rising unemployment around the world. View Full Image Reuters Workers upload tires onto a truck at a tire factory in Hefei, Anhui province, China on Sept. 14. Citing a jump in Chinese imports, the Obama administration said Friday it would impose stiff tariffs on Chinese-made tires for the next three years, invoking a section of trade law that China agreed to as a condition for its joining the World Trade Organization in 2001. The move essentially would cut off the source of nearly 17% of all tires sold in the U.S. last year and hit cost-conscious consumers particularly hard, as retailers will have to find alternative sources for the lower-end tires that make up much of what China sends to the U.S. Beijing responded quickly. Sunday, its Ministry of Commerce said it was starting antidumping procedures against U.S. exporters into China of chicken and auto products. It said it had received complaints from local producers that the U.S. products were being dumped in China at below-market prices. The ministry denied that the move, which could lead to sanctions, was protectionist. "China has consistently opposed trade protectionism, and the country's actions since the financial crisis have reflected this stance," the ministry said on its Web site. "China is willing to continue to act in accordance with countries around the world to push forward the world's economic recovery." The announcement didn't specify the timing or the exact kinds of goods involved. Monday, Commerce Ministry spokesman Yao Jian said Beijing would exercise its rights as a WTO member to demand talks to settle the dispute. An official with the U.S. Trade Representative's office Sunday defended the trade decision and warned that Washington would be "inquiring closely" over the next several days as to the basis for China's response. "Countries are entitled to actions that they think are fair and consistent with the WTO," the official said. "If this is retaliation, there may be a basis for the U.S. to react. We strongly prefer to continue what were very productive talks with China." Both chicken and auto products have been part of a battle between China and the U.S. in which both sides have already instituted trade-restricting measures. China has already effectively blocked U.S. exports of poultry products in retaliation for a similar U.S. block of Chinese poultry. And earlier this year, China raised tariffs on imported auto parts. President Barack Obama's tire announcement, made late Friday, came as the administration is about to lean heavily on organized labor to support its health-care-overhaul proposals. The United Steelworkers union has argued that a surge of Chinese tire imports has cost American jobs. Over the weekend, China's state-run Xinhua news agency said in a commentary that the U.S. sanctions were politically motivated by a president trying to secure union votes in his health-care battle. "It is a huge regret that crucial China-U.S. trade relations are once again disrupted by [domestic] political disputes," the agency said. Mei Xinyu, a researcher at a think tank that reports to China's Ministry of Commerce, said China has historically avoided taking countermeasures in trade disputes but that it shouldn't be shy now. "China should bring into effect retaliatory measures this time, such as high punitive import tariffs on American imports," Mr. Mei said. He also said China should avoid taking the issue to the WTO because such complaints take years to resolve. "America will achieve its goals if China tries to resolve this dispute through the WTO," he said. Foreign business leaders in China said the U.S. decision almost invited Chinese retaliation. James Zimmerman, a Beijing-based American lawyer, said politics and trade can't be separated but that "overt political posturing welcomes a like response. We can expect the tit-for-tat political posturing going forward and in a way that may be damaging to U.S. commercial interests." Foreign businesses operating in China have also argued that China is itself engaging in protectionism. The European Union Chamber of Commerce in China recently released a catalog of business complaints chronicling a deteriorating atmosphere for foreign enterprises operating in China. The country's recent stimulus package, for example, in some cases favored domestic manufacturers, the EU Chamber said. Despite the rising tensions, some observers cautioned against blowing the dispute out of proportion. Yan Xuetong, director of Tsinghua University's Institute of International Studies, said during such a rocky economic time, trade disputes between two economic giants like China and the U.S. are almost inevitable. But the two sides are meeting regularly and likely can sort it out through diplomatic channels, he said. Chinese President Hu Jintao is set to meet Mr. Obama this month at an economic summit in Pittsburgh. Mr. Obama is to visit China in mid-November. Chinese officials "are definitely going to do something to express their dissatisfaction, but it won't be serious," Mr. Yan said. "The two sides need each other." —Kersten Zhang in Beijing and Susan Davis in Washington and the Associated Press contributed to this article. Write to Ian Johnson at ian.johnson@wsj.com