The White House on Thursday threatened China with tit-for-tat tariffs on imported goods after Beijing imposed extra costs on the importation of sport utility vehicles (SUVs) and other cars from the US.
Commerce secretary John Bryson said a series of breaches by the Chinese this year showed they were ignoring trade rules.
The dispute began after data revealed the Chinese manufacturing sector continued to contract in December.
China's tariffs, ranging from 2% to 22%, are unlikely to inflict much pain on American carmakers, which generally manufacture most of their cars for the Chinese market inside the country. But the sabre-rattling by Beijing may undermine efforts by the White House to foster an export-driven recovery.
Bryson said: “The United States has reached a point where we cannot quietly accept China ignoring many of the trade rules. China still substantially subsidises its own companies, discriminates against foreign companies and has poor intellectual property protections.”
Bryson, along with US trade representative Ron Kirk, was in China last month to address its concerns on areas from software piracy to agriculture. “But we must see follow-through. We cannot rely just on words. We need timeframes and concrete results. Anything short of that will be unacceptable," Bryson said.
In reponse the Chinese claim US carmakers benefited from huge bailouts during the banking crash that give them an unfair advantage.
China’s move comes as the US, increasingly frustrated by a mammoth trade deficit and what it calls unfair treatment of its major companies in China, changes its own tactics. It is building the argument that China’s support for state-owned firms violates World Trade Organisation rules.
A WTO appeals panel overturned the first American attempt to apply anti-subsidy measures against Chinese steel, sacks and tyres, but left the door open for a more nuanced case that China subsidises its state-owned sector.