Closing Bell

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Closing Bell

Commerce Chief: China Tariffs Mean Fair Trade -- Not Trade War


On Friday, the U.S. Commerce Department announced it would impose import duties on shipments of Chinese coated paper. The move reverses a 23-year policy of not enacting tariffs on goods from nations deemed to have non-market economies. Perhaps more significantly, the decision signifies China's evolution into a developed global powerhouse -- one which is now expected to "follow the same rules" as the U.S., according to Commerce Secretary Carlos Gutierrez.

Gutierrez told CNBC's Dylan Ratigan that the decision followed a suit filed by American paper maker NewPage, which alleged unfair trade practices. The commerce chief said that after investigation, his team was able to "identify specific illegal subsidies" in this case and decided to take action.

With the record $763.6 billion trade deficit with China, some observers fear American firms in hard-hit industries like furniture, textiles and steel will file further suits and clamor for more tariffs. But Gutierrez said the announcement does not herald a trade war with the Asian nation; He said his department will examine disputes strictly on a "case-by-case basis" -- and is not looking to give anyone preferential treatment: "We don't want or like protectionism," he declared. "We simply want U.S. companies to have a level playing field."

But currency markets did not take the decision lightly: "The news about the tariffs on China is definitely taking the [U.S.] dollar down," said David Watt, a senior currency strategist at RBC Capital Markets in Toronto.

What differentiates the "illegal" Chinese subsidies from those regularly doled out by Washington and Tokyo to their agricultural industries? Gutierrez explained that "when a government owns banks" and is able to "transfer non-interest-bearing loans to a company," or is willing to "grant a 'loan' that doesn't have to be repaid -- that is an illegal subsidy."