Trade War Watch 10: WTO Accepts Chinese Tire Complaint, Trade War Escalates

Bertel Schmitt
by Bertel Schmitt

In September 2009, incoming President Barak Obama slapped a 35 percent punitive tariff on Chinese car and light truck tires exported to the USA. That, in addition to an existing 4 percent duty. No American tire manufacturer had requested the boneheaded move. It was a thank-you to the steelworkers union. Cooper tires openly opposed the action. Ironically, US tire companies were hardest hit by the measure, because they had moved most if not all of their budget segment tire production to low labor cost overseas sites. No job was created in the US. Many were lost. Low cost tire manufacturing simply moved to other overseas countries, which were the only beneficiaries of the useless war.

TTAC warned of a trade war, predicted that China will drag the USA in front of the WTO, and that China would take tit-for-tat measures. All of it became true.

In the trade war dept., China slapped import tariffs or restrictions on imports of U.S. nylon, industrial acid, chicken and other products. It also has initiated an investigation into whether U.S. automakers are selling below cost, or “dumping”, cars in China. The U.S. retaliated, looking into allegations of dumping in other products, amongst those arcane items such as carbon magnesia brick. Last month, the U.S. slapped punitive tariffs on imports of Chinese steel pipes, a $2.8-billion market. Google is making on-again, off-again threats of leaving China. The trade war is escalating.

As predicted, China dragged the USA in front of the WTO. As reported by Reuters, the WTO accepted China’s complaint and agreed to convene a panel. WTO will formalize the panel at a meeting on Jan. 19. The three-judge body will look into whether the U.S. violated WTO rules. According to the Wall Street Journal, “the panel will publish a decision after nine months of investigation. If it finds that the U.S. unfairly imposed the tariffs, it could authorize China to put tariffs on key U.S. imports, up to the amount lost by Chinese exporters because of the duties. The U.S. can appeal, meaning the case could last several years.”

Says Reuters: “The time it will take to fight the case, and then revoke the tariff if Washington loses, means the tire tariffs will have been in place for most of their original three-year duration.”

The WTO complaint is widely seen as a blocking action by the Chinese to discourage the U.S. from further invoking the special safeguard clause that was rammed down the Chinese’s throats when they joined the WTO in 2001. Other safeguard complaints are piling up, and the Obama administration appears trigger-happy. A moronic trade war with Japan over nearly non-existent U.S. car exports to Japan was avoided by Japan giving in to nonsensical demands of Detroit’s automakers, which hat already mobilized Hillary Clinton and Betty Sutton.

The discriminatory safeguard clause against Chinese imports will expire in 2013, probably before the current tire complaint will have run its course. A lot of damage can be done in these three years. Trade wars exert a big price, paid by the consumer at the check-out counter. Prices of tires are already going up, and higher rubber prices will exacerbate the matter.

Students of history may note that trade wars during recession times can lead to full blown depression.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Texlovera Texlovera on Jan 20, 2010

    One minor quibble: I would not characterize President Obama as an "incoming" President as of September, 2009. He'd been in office 8 months or so...

  • Golden2husky Golden2husky on Jan 24, 2010

    Tariffs on imports like this generally are a bad idea, but lets be real: China taking the US to the WTO? Saying the US is dumping? Please. For every item the US may "dump" there are no doubt hundreds of items that the Chinese dump every day.

  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
  • Jalop1991 what, no Turbo trim?
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