During 2009, President Barack Obama struck a blow to Chinese tire manufacturers by a trade tariff. China has responded back with a hefty tax increase of as much as 21% on cars exported from U.S. to China, the world’s biggest automobile market.
China claimed that the BMW X3 and X5 as well as Mercedes Benz models, Chrysler Jeep Grand Cherokee, Honda and Cadillac models made in South Carolina, Alabama and Michigan are illegally and heavily subsidized by the U.S. and for that reason have lower prices in China as compared to the U.S..
Out of total U.S. exports of about $92 billion value of goods to China, export of cars account for about $4 billion. The tariffs might affect $2.5 billion value of American automobile exports to China.
China’s move might be in retaliation to the American plan of asking the World Trade Organization to investigate Chinese limitations on poultry exports from U.S. to China. U.S. is also studying dumping of Chinese solar panels into the U.S. which alleges that China is illegally subsidizing solar power industry and that is why Chinese solar panels are available in the U.S. market at rates below their cost of production.
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