Trade War Watch 5: Obama's Health Care And Iran Sanctions

The tires v.v. chicken war has sent stock exchanges lower. It has the price of rubber plunging. It has people deeply worried. The Wall Street Journal has arrayed comments from economists around the world who call the Obama decision everything from “something really stupid” to “disappointing news.”

State-run Chinese news agency Xinhua trotted out their own team of experts, which came to the conclusion that “the new U.S. tariffs on Chinese tire imports could escalate trade disputes between the two countries, but a full-blown trade war is unlikely.” What, no trade war? Wait, there’s worse.

What is interesting is that Xinhua gives wide coverage to the opinion of Stratfor, the “global intelligence company” as Xinhua labels them. Today, Xinhua carries a lame quote of Jennifer Richmond, China director at Stratfor, who opines that “this has the potential to be one of the more difficult points in U.S.-China relations.” Also, “it could affect the global economic rebound if it fired up further.” Where’s the beef?

It just so happens that just as Xinhua put this piece on the wire today, Stratfor’s paying customers received a piece by Stratfor with a completely new angle:

Under the heading “Chinese tire tariffs and U.S. plans,” Stratfor explains the not so immediately obvious: “In fact, the sanctions decision does not have much to do with China at all. Instead, it is an effort by the U.S. president to shore up support within his political base—specifically the United Steel Workers—before the congressional vote on his health care plan. The American president needs all the domestic support he can get at the moment and simply cannot afford to lose the unions.”

Stratfor then goes on to muse that China’s WTO complaint was likewise made for domestic consumption only: “For China, the challenge will be to bark with the ferocity of a Doberman in order to craft the image at home that China cannot be pushed around, but to nip with the strength of a chihuahua to ensure that the United States does not actually push it around.” So will they just (yuck) kiss and make up?

Stratfor thinks that China could retaliate elsewhere, “wholly outside its trading or financing relationship with the Americans.” Elsewhere: for instance, Iran. “The Obama administration is sliding toward confrontation with Iran over its nuclear program, specifically in the form of gasoline sanctions intended to make Tehran more pliable. China has the ability to supply gasoline to Tehran directly, provide shipping insurance for third parties to do the same or simply to block action at the U.N. Security Council, thereby denying any sanctions regime full international legitimacy in the first place.”

China plays an important role in the discussions about Iran’s nuclear program, if they will ever happen. Furthermore, the White House just expressed hopes that the tires will lose traction and not “cause friction on other issues of interest to the two countries such as the North Korean nuclear standoff.”

Xinhua usually avoids Stratfor’s insights on matters Chinese. That Xinhua draws attention on Stratfor on the same day Stratfor mentions the health care v.v. Iran conundrum, is far too coincidental.