President Barack Obama will carry a familiar gift to election rallies in Ohio today.

“The Obama administration will announce a trade complaint against China today as President Barack Obama campaigns in Ohio, alleging impermissible subsidies of auto- and auto-parts exports that encourage outsourcing to China from the U.S.” an administration official told Bloomberg.     (Read More…)

The United States will report China to the WTO tomorrow, Reuters says. The contention: China’s decision to impose extra duties on more than $3 billion worth of cars imported from the U.S. According to Reuters, “the complaint comes as President Barack Obama campaigns in Ohio, where auto plants have been affected by the duties.” The Prez goes on a ”Betting on America” bus tour. (Read More…)

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…)

Just over one week ago, a Detroit News piece pointed me towards a letter written by Senators Carl Levin and Debbie Stabenow, which took China to task for considering draft legislation that might possibly require more technology transfers to Chinese companies as a precondition to market access. Having chased down both the letter and the US National Trade Estimate it was based on, as well as several reports on the draft legislation itself, I wrote a lengthy piece about how Senators Levin and Stabenow were rattling the saber about what appeared to be a complete non-issue. In that piece, I not only debunked the senators’ concerns, but I also pointed out that China’s local consumer EV subsidies were the far more worrying potential trade barrier, as we have been hearing that they require that all qualifying EVs be built in China and sold with Chinese brands (a condition at odds with at least the 2004 version of China’s Auto Industry Development Plan, which stated “local governments should encourage fair competition among motor vehicles made by different places on the local market. They are not allowed to carry out any discriminative policy or measure which may lead to discrimination against non-locally manufactured automobile products.”). And it turns out that my 2,000+ words didn’t put everyone to sleep, as a new DetNews piece re-reports the Stabenow/Levin letter with the inclusion of a new motivation never mentioned in their actual letter, to wit:

For electric or plug-in vehicles to qualify for incentives under the proposed rules, they must be produced in China — by a Chinese carmaker or in a joint venture with a Chinese company

Ignoring for a moment that this wasn’t explicitly mentioned in the letter, there’s another issue here: subsidies aside, building any car in China requires a joint-venture. More importantly, China need not establish any barriers to the sale of imported plug-in or hybrid cars for the simple fact that the Toyota Prius’s epically weak sales there prove that imported NEVs can’t compete in the market. Of course subsidies may change that, but even more important is the issue of registration limits: if China requires EVs to be locally-made in order to waive Beijing’s registration restrictions, that could create more of a barrier than any cash subsidy. Meanwhile, neither Daimler nor Toyota nor VW nor BMW seems to have a problem with building EVs locally under a JV (cost and supply chain make Chinese production the logical choice anyway, necessitating a JV). The DetNews (and presumably Senators Levin and Stabenow) are getting closer to understanding the problems with China’s New Energy Vehicle Plan, but it seems they may yet have some more TTAC reading to do.

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…

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The trade war that erupted between the US and China late last summer may have cooled to an angry simmer, but its effects are once again being noticed in the automotive industry. After President Obama slapped a 35% tariff on imports of Chinese-produced tires, the Chinese government started casting around for potential objects of retaliation, and, as Bertel reported, US auto exports to China made “a good tit-for-tat.” The US imported $1.8b worth of Chinese tires in 2009, while China imported $1.1b worth of US-built cars (including transplant brands) in 2008. You shoot our dog, we’ll kill your cat.”

Now, the Chinese Ministry of Commerce has concluded its “investigation” into US auto dumping and illegal subsidies  in the Chinese market, and it just so happens to single out the two automakers who are partially owned by the US. Coincidence? Not so much. [Hat Tip: Michael Banovsky]

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It’s been some time since since we had a “Trade War Watch” on mounting trade tensions in the auto industry, and thank goodness for that. In this economic climate of cuts, currency swings and bankruptcies, what we need are things which will make the situation worse, right? In May I reported about how the EU put a 20.6 percent tariff on aluminium wheels from China. The EU did this in response to complaints from domestic manufacturers. Naturally, this left a sour taste in China’s mouth. Well, over 5 months later, you’d think that the EU would have calmed down and this nasty business would be swept under the carpet, right? Erm, not quite….

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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…)

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…)

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. (Read More…)

As U.S. President Barack Obama landed in Shanghai for a weeklong visit to his largest creditor, China, the news awaited him that China’s Ministry of Commerce will investigate the U.S. government’s financing and rescue plans for the American auto industry, Shanghai Daily reports.

The move is part of China’s probe into possible dumping and subsidies on U.S.-made vehicles imported to China, the ministry said. Trade officials will be looking for dumping practices and for unfair government subsidies.
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