The United States on Monday launched a new trade case against Chinese auto and auto-parts subsidies as President Barack Obama stumped for votes in Ohio, an auto manufacturing state that could be decisive in the November presidential election.
Beijing fired back with a complaint against U.S. duties on many Chinese exports, in the latest sign of trade tension between the world's two largest economies.
The new U.S. case filed at the World Trade Organization targets what Washington said were "extensive subsidies" to Chinese auto and auto-parts producers located in designated regions, known as export bases.
"Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest. It's not right; it's against the rules; and we will not let it stand," Obama said in the advance text of a speech he was to deliver in Ohio.
Republican presidential nominee Mitt Romney has accused Obama of not being tough enough with Beijing on trade and currency concerns that threaten U.S. jobs.
"Campaign-season trade cases may sound good on the stump, but it is too little, too late for American businesses and middle-class families," Romney said in a statement.
The decision to launch the case follows pleas from U.S. steelworkers and other union groups for action to stop what they said was a flood of unfairly subsidized Chinese auto parts.
USTR said the targeted export bases made at least $1 billion in subsidies available to auto and auto-parts exporters in China during the years 2009 through 2011.
In addition, U.S. trade officials said they are taking the next step in a separate case filed in June against Chinese duties on U.S. auto exports by asking the WTO to establish a panel to hear the U.S. complaint.
That case was also announced when Obama was on a campaign swing through Ohio.
China's counter complaint filed on Monday potentially affects close to 30 products that have previously been targeted by U.S. duties, a trade official familiar with the case said.
In a brief statement, the WTO said the products included steel, tires, magnets, chemicals, kitchen appliances, wood flooring and wind towers.
In March, the U.S. Congress voted to ensure that Washington could impose duties on subsidized goods from China and Vietnam, a move the White House said was needed to protect American jobs.
China's Commerce Ministry hit back against the United States on Monday for targeting China with anti-subsidy duties.
"China hopes that the United States can correct its mistaken policy and appropriately resolve China's concerns through WTO dispute resolution mechanisms and consultations," Commerce Ministry spokesman Shen Danyang said in a statement.
The Commerce Ministry made no mention of the U.S. decision to initiate the auto case against China.
The trade enforcement steps could play well politically in the U.S. industrial heartland, including in states such as Ohio that could determine the outcome of the November 6 election.
Obama holds a narrow lead in polls, but the sluggish economy and high unemployment rate have weighed on his re-election bid.
Romney has accused Obama of making too many concessions to China and has promised to be tougher on issues such as trade and currency manipulation.
"I will not wait until the last months of my presidency to stand up to China, or do so only when votes are at stake. From day one, I will pursue a comprehensive strategy to confront China's unfair trade practices and ensure a level playing field where our businesses can compete and win," Romney said in his statement.
The Obama campaign has frequently said that Romney was responsible for sending many U.S. jobs overseas, including to China, during his time working at private equity firm Bain Capital.
The WTO is unlikely to make a ruling on the two cases before the U.S. election.
(Additional reporting by Michael Martina in Beijing, and Jeff Mason, Mark Felsenthal and Matt Spetalnick in Washington; Editing by Jeremy Laurence, Tim Ahmann and Eric Beech)