When we last checked in on the low-level trade war between China and the US, which was sparked by President Obama’s 35% tariff on Chinese tires, the Chinese government had ruled that American large cars and SUVs were being “dumped” on the Chinese market, but wasn’t doing anything about it. Now, Reuters reports that China is doing something about it, namely saying that it plans to impose tariffs of up to 22% on imports of American-built large cars and SUVs. And the “up to” is key: GM and Chrysler are being hit hardest (unsurprisingly), while American-made BMW, Mercedes and Acuras are receiving considerably lower tariffs.

Still, China only imports $1.1b worth of vehicles in this category, whereas the US imported some $1.8b worth of Chinese tires prior to the Obama tariffs.  Like most of the news around Chinese-American relations, this is more saber-rattling than substance. But with economic conditions still shaky in the US, and a Presidential election getting into full swing, small spats can escalate into larger confrontations. And with China surpassing the US as the largest market for cars in the world, it’s probably no coincidence that this simmering conflict largely involves cars and car-related products.

As you’ve read here many times, the drums against imports have been beating in Brasília for a long time. Now, the government is acting. It has opened up its little tragic bag of dirty tricks and is pulling the first, as it were, rabbit out. It also promises to dip into that bag again if this first rodent fails to bite. Moneyed (and not so moneyed Brazilian import buyers of Chinese cars) Brazilian consumers should run to the dealerships to get ‘em while they can. They should also put some money aside as the measure will also affect parts makers and consequently prices. (Read More…)

Beijing closed the book on the tit-for-tat saga that had started with the U.S. slapping punitive tariffs on Chinese tires. China’s Ministry of Commerce (MOC) issued a final ruling today, declaring that the United States has dumped subsidized sedans and sport utility vehicles with engine displacement of 2.5 liters or bigger on the Chinese market, writes China’s state-owned new agency Xinhua. According top the MOC, this has harmed China’s domestic auto manufacturing industries. Then, China did nothing. (Read More…)

George Orwell’s warning, that “the first victim of war is the truth,” apparently applies equally to trade wars. On Friday, Senators Carl Levin and Debbie Stabenow (both D-MI) wrote the United States Trade Representative to express their concern over “reported draft regulations” of China’s New Energy Vehicle plan, noting

We are concerned that these draft regulations continue China’s long history of breaking international trade rules.

Given that the ongoing low-level trade war between the US and China, this was a predictable bit of saber-rattling. But if Levin and Stabenow’s political motivations are easy to understand, the logic that leads them to believe China’s New Energy Vehicle plan is a violation of international trade rules is not. Meanwhile, neither the Senators nor the USTR appear not to have heard about another, more serious possible trade issue arising from China’s headlong dash towards electric vehicles. Sounds like a job for The Truth About Cars…

(Read More…)

It looks like North Korea’s artillery barrage on a small South Korean island had one of those famous unintended consequences: South Korea, faced by a belligerent enemy, decided to let bygones be bygones. A shell-shocked South Korea and a proud America “completed a free-trade agreement that will eliminate most tariffs on exports and solidify one of the nation’s most significant alliances in Asia,” as the New York Times praises the deal. South Korea stared down the barrels of North Korean guns, and America won the war that never was.

Don’t run down to your Hyundai dealer just yet and expect dramatic price reductions. The deal has major hurdles to pass. And at closer inspection, it looks like an oinking pig in a poke. (Read More…)

After President Obama paid his outstanding union dues and slapped a 35 percent punitive tariff on Chinese car and light truck tires exported to the USA, we predicted two outcomes:

1.)    It will start a trade war, and China will drag the U.S.A. in front of the WTO. Sure did. The WTO accepted China’s complaint, and the trade war turned into a major conflagration.
2.)    We said that not a single new job will be created in the U.S.A., and “what the boneheaded decision does is simply shift tire production from China to other low cost producing countries.” Sure does. (Read More…)

Now that the Conservatives (with the help of the Liberal Democrats) have come to power in the UK, the Conservatives are going to push forward their plans for a reduction in the UK deficit (i.e savage cuts). Now, while I agree in the long term, this will be good for the UK, in the short term, it will cause higher unemployment and severe “belt tightening”. The UK isn’t the only country with this frame of thinking. Only today, the Spanish government has announced deep budget cuts in order to reduce their deficit and to prevent markets from thinking of them as the next “Greece”. So, with the UK and Spain making these budget cuts, the Euro looking unsteady and Greece still not convincing markets, what else could make Europe stare at another recession? That’s right, a possible trade war. (Read More…)

Yesterday, a strange love-fest between U.S. Ambassador to Japan John Roos and Japan’s transport minister Seiji Maehara ensued. After their meeting in Tokyo, as reported by the Nikkei, the ambassador and the minister said that everything is hunky-dory, and that Toyota’s recent recalls won’t undermine relations between the U.S.A. and Japan. Which is odd in itself: Since when does a $15 gas pedal get a leading role on the world stage of international politics?

Ambassador Roos effusively told reporters that the recall issue ”in no way has any kind of direct or indirect impact on the strength of the bilateral relationship between the United States and Japan.” Who said it would? (Read More…)

Recently, there have been voices that mentioned that the attacks on Toyota could be politically motivated. Let’s face it: Toyota has problems. So have other auto makers. There are marked differences in reaction to and treatment of these problems.

One of the tenets of warfare is that you never attack the innocent. You wait until your opponent bumbles. Tricking an “enemy” into doing something really stupid, and exploiting this to declare a “righteous” war, is as old as Julius Caesar. Being the “defender” makes you a winner in the war of  public opinion. You need the public on your side to win a war.

Using an outside scapegoat to deflect criticism is the oldest trick in the book. Time and again, people fall for it.

The Japanese were docile, polite, and cautious when in came to Toyota’s troubles. The more surprising is today’s piece in the Nikkei [sub]. Usually, we don’t copy and republish whole pieces. But in the name of authenticity, and because the Nikkei is only available on-line as paid subscription, we make the whole piece available. (Read More…)

Representatives Kevin Brady (R-Texas) and Dan Boren (D- Oklahoma) are tired of Obama’s punitive tariff on Chinese tires. They called for a government report on the economy-wide effects of the measure, Reuters reports.

“I am concerned that the administration’s tire tax will cost us jobs in the United States and raise prices for tires for hardworking Americans,” Brady said. (Read More…)