The Obama administration filed a complaint Monday with the World Trade Organization, alleging that China has illegally subsidized automotive exports and undercut American suppliers.
The complaint accuses China of providing $1 billion in illegal subsidies to auto and auto parts exporters between 2009 and 2011, according to a senior administration official.
The Obama administration says that the benefits provided to Chinese companies violate a WTO prohibition on "export-contingent subsidies."
In response, China filed its own case against the United States on Monday, according to the WTO. Details of the complaint were not immediately available.
The WTO is the global organization that referees trade disputes between nations.
The Chinese auto industry has grown rapidly in the last decade as China's growing middle class made the nation the largest market for car purchases in the world. General Motors now sells more cars in China than in the United States.
Chinese exporters have managed in recent years to quickly ramp up their shipments of auto parts to the world's largest economy, according to the Obama administration complaint. The White House estimates that up to 60% of China's auto parts exporters benefit from subsidies, making it hard for American companies to compete.
China exports virtually no assembled cars to the United States, but the export of auto parts by China is having a big impact on U.S. jobs. The parts industry in the United States employs far more workers than the automakers who assemble and sell the finished cars.
In a related case filed in July, the administration launched a complaint against China with the WTO over $3 billion in duties Beijing placed on U.S. auto exports.
In the interconnected global economy, trade is becoming ever more important to the average American worker. Exports can provide jobs in fields from agriculture to aircraft, from movies to manufacturing. Conversely, U.S. industries face increasing competition from imports, forcing the weaker companies out of business.