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The Rubber Hits the Road - The Coming Trade War with China

Old 09-14-09, 07:34 PM
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The Rubber Hits the Road - The Coming Trade War with China

I'm surprised there isn't a thread about this yet. Forget the stimulus, marches, and health-care, it's stuff like this that threatens to derail the recovery and plunge the world into a new Depression:

Originally Posted by The Washington Post
China fired back at the U.S. today, filing a complaint with the World Trade Organization over the Obama administration's Friday decision to impose tariffs on vehicle tires imported form China.

Is this a looming trade war between the U.S. and the world's largest holder of U.S. debt? Or is it saber-rattling setting up the G-20 meeting in Pittsburgh later this month?

Either way, the world markets are spooked. They opened down this morning, responding to Friday's news, and had been trading flat all day before ticking up in afternoon action. China's retaliation has depressed the Asian markets, which are trading now.

In his speech to Wall Street this morning, President Obama defended the tariffs, saying they are part of the enforcement of existing trade treaties between the two nations. You can read The Post's Peter Whoriskey and Anne Kornblut on the imposition of the tariffs by clicking here.

The U.S. is a huge market for Chinese tires and the U.S. thinks China is violating trade treaties by pricing their tires too low, harming U.S. manufacturers. China naturally disagrees. The dispute will be mediated by the WTO. The volume of Chinese tires imported to the U.S. has tripled over the past five years.

If this is mere paper-pushing trade scuffling designed by China to get a better trade deal with the U.S. at the G-20 summit, then that's less worrisome.

If, on the other hand, this escalates in a real trade war, then that's a potentially disastrous outcome. All you have to do is Google "Smoot-Hawley" to find out what Draconian, protectionist tariffs imposed by the U.S. in 1930 did to shove America into the Great Depression.

Trade wars are always bad. They can be especially damaging when an economically fragile nation -- the U.S. -- is trying to swim out of a riptide recession.
Didn't the Democrats kick-out and marginalize the anti-free-trade crowd during the Clinton administration? Now Obama's backsliding and implementing bad policy to appease supporters.

Spoiler:
(And yes, Bush did it too. But Bush was a moron. What's Obama's excuse?)
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Old 09-14-09, 07:40 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Yes... it's bad policy to even attempt to have fair trade practices with other nations.
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Old 09-14-09, 07:50 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by Sean O'Hara View Post
Spoiler:
(And yes, Bush did it too. But Bush was a moron. What's Obama's excuse?)
Change?
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Old 09-14-09, 07:52 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Even though it is pretty obvious that the current administration is just kowtowing to their union support base, I have to wonder how many more formerly vibrant domestic industries we are going to simply allow to be marginalized by cheap Chinese imports. Fair trade is one thing, but how much longer can we sustain ourselves as a economically powerful nation this way?

Maybe I am just biased because I once lived in a town that depended heavily on a local Uniroyal plant.
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Old 09-14-09, 07:59 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

I understand what people think tarriffs are supposed to accomplish... but most don't realize the unintended consequences such as this. Or maybe they realize it and would rather be ostriches. After all, it does make them feel like they did something
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Old 09-14-09, 09:02 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by jfoobar View Post
Even though it is pretty obvious that the current administration is just kowtowing to their union support base, I have to wonder how many more formerly vibrant domestic industries we are going to simply allow to be marginalized by cheap Chinese imports. Fair trade is one thing, but how much longer can we sustain ourselves as a economically powerful nation this way?

Maybe I am just biased because I once lived in a town that depended heavily on a local Uniroyal plant.
I wouldn't worry. We'll raise the minimum wage, require more leave for employees, impose some feel good environmental legislation, and then you'll see us compete.
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Old 09-14-09, 09:03 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by mosquitobite View Post
I understand what people think tarriffs are supposed to accomplish... but most don't realize the unintended consequences such as this. Or maybe they realize it and would rather be ostriches. After all, it does make them feel like they did something
Possible violation of WTO agreements aside for a moment, what the current administration proposed is not permanent economic protectionism for the tire industry, but a graduated 3 year tariff structure. I don't think your ostrich metaphor applies so neatly as that.

Arguably, this could buy the domestic tire industry some extra time to adjust and try and save itself. Lord knows they cannot count on consumer loyalty to domestic products.
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Old 09-14-09, 09:05 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by kvrdave View Post
I wouldn't worry. We'll raise the minimum wage, require more leave for employees, impose some feel good environmental legislation, and then you'll see us compete.
What we need are green tires.
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Old 09-14-09, 09:06 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Made with love.
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Old 09-14-09, 09:07 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by jfoobar View Post
What we need are green tires.
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Old 09-14-09, 09:15 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by jfoobar View Post
Possible violation of WTO agreements aside for a moment, what the current administration proposed is not permanent economic protectionism for the tire industry, but a graduated 3 year tariff structure. I don't think your ostrich metaphor applies so neatly as that.

Arguably, this could buy the domestic tire industry some extra time to adjust and try and save itself. Lord knows they cannot count on consumer loyalty to domestic products.
I'll add that this action was also taken in response to alleged Chinese dumping in the U.S. in violation of trade agreements. I know that anti-dumping laws aren't uncontroversial, but it's not as if the administration arbitrarily decided to impose tarrifs on Chinese tires.

All of that said, I sincerely hope that this is not a move toward a broader protectionist policy. I think it's a very good sign that the administration is not trying to justify this on broader protectionist grounds -- they are explicitly pegging this to China's violation of the trade agreements, which gives them much less room to impose other tarrifs down the road.
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Old 09-14-09, 09:15 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

I'm just glad at least some Americans are intelligent enough to realize that foreign nations, like China who are very protectionist with regards to our exports, using virtually slave labor to drive US industries out of business is a good thing.



If that keeps happening like it has for the last 20 years: whole US industries collapsing, we'll be a much better nation for it.
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Old 09-14-09, 11:41 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by JasonF View Post
All of that said, I sincerely hope that this is not a move toward a broader protectionist policy. I think it's a very good sign that the administration is not trying to justify this on broader protectionist grounds -- they are explicitly pegging this to China's violation of the trade agreements, which gives them much less room to impose other tarrifs down the road.
Just like a public option in health care does not mean that it will lead to a single payer system, despite Obama saying that is his goal?

I admit I am now hyper cynical with this administration, but I would not take it to mean much. They don't seem to mind baby steps.
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Old 09-15-09, 11:21 PM
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Re: The Rubber Hits the Road - The Coming Trade War with China

Originally Posted by kvrdave View Post
I admit I am now hyper cynical with this administration, but I would not take it to mean much. They don't seem to mind baby steps.
Too bad those steps are being taken by obese mongoloid octuplets. Not even Cheney could eat all these babies.
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