President Obama started a trade war by slapping a 35 percent punitive tariff on imported tires as a big “Thank you” to his friends at the United Steelworkers. Most industry observers think this was mentally challenged exercise: Production of cheap tires will be shifted to other countries. Not a single US job will be created. Jobs will be lost and consumers will have to pay more.
The war is not going away. As a matter of fact, it is heating up. Not only did China lodge a formal complaint to the WTO. China has told the United States it is launching a trade investigation that could lead to new import duties on autos and sports utility vehicles made by Chrysler, Ford and General Motors, a U.S. industry official confirmed to Reuters.
The action will leave no happy faces with U.S. Commerce Secretary Gary Locke, Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack, who are in China right now for high-level talks aimed at resolving trade disputes between the two countries.
The man who started the war, President Barack Obama, will visit China in mid-November.
“The documents containing the charges were presented by China to the U.S. government this week, but have not yet been translated. Therefore we are not in a position to comment on the matter at this time,” Steve Collins, president of the American Automotive Policy Council said.
Collins estimates that the traditional Big Three U.S. automakers export about 9,000 vehicles per year to China. Total U.S. passenger car exports to China — which would also include those made by manufacturers such as BMW and Nissan — were $1.1 billion in 2008. A nice tit-for-tat. “The value of Chinese tire exports to the U.S. totaled $1.8 billion last year,” writes the Wall Street Journal, “in a market segment worth $16 billion a year.” You don’t buy our tires, we’ll escalate and you won’t sell Escalades.
In the meantime, the war threatens to veer out of control as U.S. textile, steel and some other manufacturers gather sponsors in the Senate and House of Representatives for a bill that would allow the United States to slap anti-dumping duties on goods from countries that “undervalue” their currency. Obama’s Treasury Department decided this month against formally labeling China as a currency manipulator.