Looming Trade War With China Over Tires?
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.
-- Frank Ahrens
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September 14, 2009; 2:37 PM ET
Categories: The Ticker | Tags: China, Smoot-Hawley, protectionism, protectionist, trade war
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