In what some are calling an effort to appease Big Labor before pushing a Universal Health Care agenda that has many up in arms, Obama recently announced a tariff on imported Chinese Tires. While stocks in American tire companies experienced a temporary boost as a result of this announcement, it is questionable whether this decision will actually bring any additional jobs to America, since many of the companies that produce low cost tires were driven out of business years ago by cheap foriegn imports. While the affect of the tariff on the tire market, and the tire industry job market, remains to be seen, one thing is clear: China does not like it. The 35% tariff is no small tax, and China has already complained to the World Trade Organization about the decision. Incidentally, the legality of the tariff exists because of a provision that China reluctantly aceded to when it joined the organization in 2001.

China’s upset doesn’t stop at a mere complaint, however; they have responded by launching an investigation into whether the US is “dumping” Chicken and autoparts by selling these goods to the Chinese for less than their value. This not only threatens the export of these goods to China, but it also hints at a larger problem on the horizon.

Some financial analysts and economic experts are suggesting that these political-based moves may lead to an all-out trade war between the U.S. and China, which will lead to retaliatory laws being passed on a tit-for-tat basis that could spell trouble for both countries in an already troubled economic time.

Neither country wants to sit back and allow the other to impose tariffs and taxes without penalty, and both countries are interested in protecting the interests of their own citizens. Obama is attempting to stave off job loss in an industry that has been hit by more than 4,000 job losses since 2004, while China is attempting to protect the export business that is vital to their economy. Neither is likely to give up on such an important goal,  nor does either country want to be the one to “back down” first. As Eswar Prasad, former president of China’s Unit of the International Monetary Fund, stated, “both countries are somewhat backed into a corner.”

Obama and President Hu Jintao of China are scheduled to meet in Pittsburgh in early October for a Group of 20 Summit meeting, so perhaps these issues can be discussed and resolved at this time, in order to avoid the all-out trade war that might result if negotiations are unsuccessful.