Obama's decision in tire dispute has broad implications

The prospect of a trade war with China fueled fears of wider fallout Monday, prompting many economists to criticize President Obama's decision to slap import tariffs on Chinese-made tires.

China responded to Obama's tariff plan by saying it would investigate unfair-trade complaints involving American auto and poultry products and has already filed a complaint to the World Trade Organization.

Traders fretted that the 35 percent tariffs might prompt China to send a sign of disapproval by paring purchases of U.S. government bonds, writes the Washington Post. And a group of economists and climate activists fretted that the president's action might undercut U.S.-China climate talks and poison relations just two weeks before the summit of the Group of 20 major economies to be held in Pittsburgh.

Moreover, economists argued that it would all be for nothing; they said tariffs on Chinese tires would probably boost U.S. imports from countries like Poland and Mexico and do little to help the American steelworkers whose union brought the trade action in the first place.

Mr. Obama's decision in the tire dispute also has international implications, since no nations are more central to global trade than US and China. In broad terms, the global recovery from recession will hinge in part on rebuilding commerce, yet many nations face internal pressures to aid specific hard-hit industries. Such pressure could lead to more trade disputes.

But all this doesn't mean a new trade war is going to break out. Most national governments are very mindful of a central lesson from the Great Depression: Curtail trade, and the whole economy suffers. The two countries involved already downplayed the dispute and said it won't hurt ties between the two countries.