On Friday, the President upheld a ruling by the US International Trade Commission that imports of Chinese produced tires were hurting US producers. Thus, a 35% tariff will be levied on such imports, which will decline to 30% and 25% in the second and third years. We know that tariffs result in dead weight loss, which isn't good. This is also trade protectionism, and coupled with the "buy American" provision in the stimulus package, has infuriated many trade partners.
So then, what is the rationale behind this decision?
Is it government failure, since politicians have to carry the interests of their constituents? (The article mentioned winning support for the health care proposal).
Is it a good decision to protect the American tire industry? What about innovation and adapting to changing markets?
Will other countries retaliate with their own trade protectionism legislation?
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