A worker loads tires onto a truck trailer at a tire factory in Hefei, Anhui province on Monday.
(Reuters)Photos (1 of 1)
US-China trade dispute about more than tires
The US tariff on Chinese tires could have a ripple effect. Trade disputes have been rising among other nations.
By Mark Trumbull | Staff writer/ September 14, 2009 edition
President Obama has ratcheted up US-China trade tensions at a sensitive moment for the global economy.
The dispute in question centers around automobile tires, and the White House has sided with US manufacturing workers who say they are being harmed by rapidly rising imports from China.
The president’s decision has implications for a fragile domestic economy: A new 35 percent tariff on Chinese tires could help some American factory workers keep their jobs, at a time when economists say America needs manufacturing industries as a core platform for future economic growth. But the move also promises to make US consumers – already struggling in the recession-battered economy – pay higher prices for tires.
Mr. Obama’s decision in the tire dispute also has international implications, since no nations are more central to global trade than US and China. In broad terms, the global recovery from recession will hinge in part on rebuilding commerce, yet many nations face internal pressures to aid specific hard-hit industries. Such pressure could lead to more trade disputes.
“This is extremely worrisome. One only hopes that both sides will keep their heads,” says Tu Packard, an expert on the global economy at Moody’s Economy.com. Trade disputes have also been rising among other nations, she says.
Over the weekend, China responded to Obama’s tariff plan by saying it would investigate unfair-trade complaints involving American auto and poultry products.
All this doesn’t mean a new trade war is going to break out. Most national governments are very mindful of a central lesson from the Great Depression: Curtail trade, and the whole economy suffers. And for the most part, Ms. Packard says, the World Trade Organization has been serving as a forum for resolving disputes.
Last month, for example, China lost an appeal of a WTO ruling in an auto-parts case brought by the United States, the European Union, and Canada. And a high-stakes dispute about aircraft – in which Boeing says that European rival Airbus has gained from illegal subsidies – is working its way through the WTO process.
On Monday, China took the tire issue to the WTO, filing a complaint over the new US tariff.
China’s tire exports to the US have risen from 14 million in 2004 to 48 million last year, the US International Trade Commission found. Americans bought about 276 million tires last year, so the Chinese inroads are significant, causing the market share of domestic producers to fall below 50 percent of unit sales last year. Imports from other nations have risen only slightly during the past five years.
The US has lost about 5,000 tire jobs since 2004, but critics say the new tariff will hurt the economy more than it helps on the jobs front.
One lobbying group, the Consuming Industries Trade Action Coalition, issued a statement arguing that the tariff will cost jobs in downstream industry (automaking), will push up prices for consumers, and could lead to a rush of similar protectionist trade cases being filed.
Obama’s tariff is lower than the 55 percent levy recommended by the International Trade Commission. But the ITC panel was split, with a four-member majority supporting sanctions and two members arguing for aid for workers who lose their jobs due to the industry’s rapid transition.
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Comments
2. James Corbin | 09.14.09
We had better wake up and understand that all this crying about the consumers having to pay more is just a smokescreen which comes from those who believe in “free trade.” All that is free is American manufacturing jobs which are being sent overseas at an alarming rate. One day we will wake up and find that nothing is made in this country anymore and on that day, the world will know that the Emperor has no clothes and the once mighty dollar will be worthless.
3. James S. Klich II | 09.14.09
This is not a big issue. There are much larger problems in the world that should be focused on.
4. barrett hays | 09.14.09
The Chinese are in an enviable position. Lots of labor, heavy industrialization, educated population, and lots of cash and no world wide arms or defense commitment to the world. The U.S. isn’t so lucky right now. So we go into the game a little behind. Our best moves aren’t tariffs. Our best moves are new techologies and their applications asap. Leave the old stuff in China and forge into the 21st century. Just this time don’t farm out the technology or its’ manufacturing when we are ahead again. This can be done. And I am sure the President knows this, because in the old game we are loosing. In the new game we can make the rules and win big.
5. Wen Rixin | 09.14.09
Hard Time for Both
Just several days ago, CCTV and Chinese newspapers loudly boasted about the warm reception of Wu Bangguo, the head of Chinese Parliament and the second most important figure inside CPC, by his American counterparts in both chambers of the Congress, followed by hand-shaking with President Obama. Under Chinese culture and mentality, Obama’s signature of recommendation of punitive tariffs, subsequent upon the seemingly friendly and consultative atmosphere around the top leaders of the two states, simply amounts to the big slap on China’s face which Chinese value greatly. Indeed, the trade-tension between the Two arrives at very politically critical moment. On American side, Obama’s ambition to push ahead with his healthcare reform requires him to impress the public he has the courage and capability of keeping the promise he has made openly despite the possible anger from the outside. On the Chinese side, CPC is working hard at the grand show in celebration of its 60-year long ruling on Mainland which Chinese authority eagerly expects the masses to take great pride of. In this case, the growing nationalism makes it really difficult for Chinese government to soften its tone against Uncle Sam, either rhetorically or behaviorally.
Yet, neither wants a full-blown trade war and the skillful handling of this delicate matter is precisely what both Americans and Chinese demand on their respective leadership that are anticipated to work in joint efforts with the other for the quick economic recovery.
6. bayu | 09.14.09
right i agree with Obama, the chinese product has also become majority in our country, a lot of our local workers has lost their’s jobs, because the chinese product offering more cheap price than the market local. the goverment must help the people to growth by decrease import
7. Jack | 09.15.09
Obama just made the terrible situation worse than better. I can’t see what he can expect through this decision. Only gain 5000 jobs does not help to settle the economic problems, but the subsequence could lead to serious troubles.
8. Ben Gee | 09.15.09
Rather than 35% duty on Chinese tires, the US should put a limit or quota on Chinese tires for the following reasons:
1. Our consumers will not be punished by higher prices immediately.
2. Our retailers will be able to adjust slowly rather than lose business right away.
3. Less disruptive to the Chinese suppliers-less chance of Chinese retaliation.
4. The effect may be limited for US manufacturing. Chinese tires will likely be replaced by other low lost suppliers from India, Mexico or Brazil.
Are we going to close our doors to world trade like we did in the 1930’s? The results will be the same.
9. chris | 09.15.09
There can be no doubt over the last decade low skill and simple production jobs have been lost to countries with lower production cost. There is no doubt America is going through a difficult econmic situtation. Should we just totally abandon the simple manufaturing sectors of our economy? Of course not. We should attempt to ease the presures and influx of cheaper products from overseas. With the steel manufactures in America we have shown we can compete in certain areas of simple construction sectors. The question is what sectors are vialble? I think hearing that solar panel constuction in China is now the more then any other country is not good for advanced industrial countries like Germany and America. Industry needs to sort out what is viable for America. We use alot of tires in America a market we probably do not want to lose. There does seem to be a gradual ajustment forty eight out of two hundred and seventy six million throughout the last few years is significant , not over whelming. I think complexe industry is important along with the service sectors. The development of other countires probably will not differ much from what we have seen in this country. Just faster in some countries and not at all in others. The movement of Americans to indutrial centers throughout the world is a reality Americans must come to grips with for employment not necessarily within urban areas anymore. Many American already have started to think more towards a futuristic reality about growth, development, and employment throughout the world. The problem is that many Americans have not.
10. Lius | 09.15.09
Is this the smart action of President to give China’s tries higher tariff? Can he save 5000 workers from it? I can understand why Obma had to do it under the pressure of some US lobbies becuase Obma have to reduce the power against his healthcare reformation. No doubt, it’s not the trade probliem but the political.
Chinese won’t be dead becuase of Ameriacn tire tariff, however, American will face the auto price raisng and retailing difficulties. And more, US is leading a bad begining that would be harm to free trade when the global was recovering.
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1. watcher | 09.14.09
The tire unions are turning the tire industry into auto industry. Goodyear will not leave china the current largest auto market in the world just like GM never left china even when they never import cars from china. Except tire industry cannot support multiple production companies in every country. This will drive up costs and drive tire companies into bankrupcy just like GM went bankrupt. GM china and GM north america has been seperated and GM north america is now TAX PAYER COMPANY. Capitalism and free trade is under assault.