Chris Low of FTN on the Tire Tariff Tiff

September 14th, 2009 2:33 pm | by John Jansen |

Apparently the Chinese government is not happy about press reports of the escalating US – China trade war after the weekend’s decision to investigate the US car and chicken industries for possible dumping, which would allow the imposition of retaliatory tariffs after President Obama slapped a tax of up to 35% on Chinese tires.

Market News and other sources report from Beijing now say the government was dismayed by US news coverage of the incident and contacted reporters to tell them this is not a trade war and the term should be avoided. In addition, the articles suggest the White House may have negotiated the tire tax in advance with the Chinese, telling them the President needed to throw a sop to the unions to win support for health care reform.

If the ITC decision was spurred by Obama’s need for union support over his healthcare reform bill, then a visit by the head of China’s National People’s Congress to the Oval Office a day before the announcement is telling, they said. Although he wouldn’t go so far as to suggest that some horse-trading between Obama and Wu Bangguo was involved, Morgan Stanley economist Qing Wang wouldn’t rule it out. ‘The timing is interesting, and at that level of discussion … in fact, China’s reports of that meeting note that Mr. Wu brought up the issue of trade protectionism,’ he said.” (Market News)

The Chinese response was apparently aimed at a domestic audience and was not supposed to cause such a heated reaction overseas. After all, it’s not as if China has already taxed US made cars and poultry. Rather, they are investigating to determine if tariffs are justified. If they are, the Chinese government now says, any action will be taken through the auspices of the WTO. And in fact, a spokesman now says any escalation can end now if the US agrees to allow the WTO to negotiate a settlement on the tire tax.

Either way, the Chinese government says the whole thing has been blown well out of proportion and everyone needs to relax.

Chris Low

Be Sociable, Share!
  1. 2 Responses to “Chris Low of FTN on the Tire Tariff Tiff”

  2. By Chicken on Sep 14, 2009 | Reply

    What, no tire fire? Did they obtain permission from the grassy knoll crowd?

  3. By Cedric on Sep 14, 2009 | Reply

    Well, it’s now obvious to me that the Chinese are scared to death that Wall Street may start a run on treasuries and the dollar, because Wall Street is scared to death that the Chinese may start a run on treasuries and the dollar.

    Now that this is clear, will someone pull the trigger or does the Mexican Standoff just go on?

Sorry, comments for this entry are closed at this time.