Is Trade War Brewing Over Chinese Tire Imports?

President Obama and Chinese President Hu Jintao meet in New York Tuesday in an attempt to prevent a major trade war. Tensions have mounted over stiff import duties the U.S. slapped on Chinese tires more than a week ago. The Chinese fear other countries will follow the U.S. lead.

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LINDA WERTHEIMER, host:

Today, President Obama meets with Chinese President Hu Jintao after the U.N. summit in New York. The two leaders are meeting against a background of renewed friction on trade.

NPR's Louisa Lim reports from Shanghai.

LOUISA LIM: This is the first test of Sino-U.S. relations since President Obama came to power. Less than two weeks ago, Mr. Obama announced major new duties on Chinese-made tires. This was the first use of a safeguard provision, which allows American workers harmed by market disruptions from Chinese imports to ask for protection. Beijing denies this, arguing its tire exports to the U.S. actually fell in the first half of this year. It says the tariffs will cost 100,000 jobs.

Mr. FRANK XU (S.D. International): This is not wise, the decision. It's a little bit stupid, I think.

LIM: Frank Xu works for tire trading company S.D. International. Less than 10 percent of his company's tires end up in the U.S. But he says imposing the tariffs is a lose-lose decision.

Mr. XU: Who can go to the profit from this politic? Not Chinese. Not America. Even the American tire manufacturer, they lose the benefit because they make tire in China.

LIM: In China, there's dismay that domestic interests - keeping the union satisfied - has taken precedence over bilateral ties. One newspaper, the International Herald Leader, accuses Washington of changing face towards Beijing.

Song Guoyo, from Fudan University, says President Obama's image has taken a bashing.

Mr. SONG GUOYOU (Fudan University): I mean, for many Chinese, it shows this guy is you know, pro trade perfectionism, take advantage of China's, you know, foreign reserve. But finally, he showed his true thought. So it's not very good for Sino-U.S. relations.

LIM: Predictably, nationalist sentiment has been ignited, with Internet users urging Beijing to stop buying U.S. debt. But Chinese experts say a full-blown trade war is not likely, with each side needing the other too much.

Zhu Lanye is a World Trade Organization expert from East China University of Politics and Law. She says Beijing fears a domino effect.

Ms. ZHU LANYE (World Trade Organization Export, East China University of Politics and Law): I think that the government is worrying whether this would become a role model for the other countries to launch product-specific measures against Chinese goods, especially under a situation where every country is experiencing difficulties under this financial tsunami.

LIM: And these fears aren't unfounded. Brazil has already slapped tariffs on Chinese car tires. Argentina's announced it will target bicycle tires. These moves haven't been widely reported in the Chinese press, perhaps indicating Beijing is trying to cool tempers ahead of this all-important meeting.

Louisa Lim, NPR News Shanghai.

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