Trade War Watch 14: Hot Wheels

Cammy Corrigan
by Cammy Corrigan
trade war watch 14 hot wheels

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.

Reuters reports that The European Union (EU) has imposed provisional anti dumping duties of of up to 20.6 percent on aluminum wheels from China. The EU did this after complaints from domestic competition arose.

Who will be hurt first? European companies like Renault and BMW. The use these Chinese wheels on their cars. Lots of other EU car manufacturers source their alloy rims in China. It needs a strong technological regimen to make them pass stringent ECE rules.

Naturally, the Chinese Ministry of Commerce denies any dumping charges and said that the investigation was not in line with World Trade Organization rules. In other words, “Stop picking on us”. The Chinese officials then tried to appeal to the good nature of the EU by saying that these duties could raise the cost of repairs for customers (concern for the European customer? How sweet!), slow the recovery of the European auto sector (Actually, Opel is probably doing more for that cause than some aluminum wheels) and hurt the interests of both China & Europe (Ah! That’s more like it!).

I don’t speak fluent “bureaucrat”, but after watching many episodes of “Yes, Minister” and “Yes, Prime Minister”, I’m pretty sure that “hurt the interests of” usually means “trade war” or such like. Mind you, to play Lucifer’s Advocate for a second, China aren’t exactly clean in this exchange of barbs. In December, they imposed a 24.6 percent anti dumping duty on steel fasteners from Europe and last month, launched an investigation into a type of optical fibre imported from the United States and Europe.

With trade between the EU and China (as of 2008) worth €326 billion, this is an area which both countries will need to tread carefully. The EU is the largest trading partner with China and if the EU annoys China, maybe some of that trade will go to China’s other large trading partner, the United States. Or on second thoughts, maybe not…..?

Join the conversation
3 of 17 comments
  • Psarhjinian Psarhjinian on May 12, 2010

    Everything I needed to know about politics, I learned from either "Yes, Minister" or "To Play The King".

  • Greg Locock Greg Locock on May 13, 2010

    Typical OEM price for an aluminium wheel is the price of the aluminium plus 15-50 bucks for casting, tooling refurb, heat treat, machining, painting and/or sealing, inspection, and boxing and delivery. And profit. The average wheel weighs about 25-30 lb, so you can imagine how much I laugh when I see the price of aftermarket wheels, which usually have the structural integrity of an easter egg (big clue - if it is gravity cast you'd better not kerb it). Aluminum spot price is about $2 per lb, or a bit less. Anyone paying more than double that retail is putting a grin on someone's face. Now, aluminium in China is probably made from coal, whereas aluminium made in Europe is made from windmills or uranium. Coal is a much cheaper source of aluminium than windmills. So either the Euros buy in their aluminium from overseas, paying somebody else to make it, or they wear the additional cost of making it from windmills. So what looks like dumping could well be because the Chinese have cheaper aluminium.

    • Patrickj Patrickj on May 14, 2010

      Aluminum smelters are normally located where there is cheap electric power, most commonly hydroelectric. A paid-for nuclear plant is probably second best. I'm sure nobody is smelting aluminum with wind power right now. The Chinese can compete producing aluminum with coal-fired electric only because of near-zero cost labor and no environmental controls. Unlikely to last.

  • Ajla From what I can see in the NHTSA data nontire part failures make up about .5% of reported crashes and aren't listed as a cause in the fatal accident reports. While we've all seen hoopties rolling around I'm guessing they don't go far or fast enough for many negative outcomes to occur from their operation.While I wouldn't want to be in that .5% I'd also want to avoid a "Bear Patrol" situation. When it comes to road safety nontire part failures are more like animal attacks while aggressive or impaired driving are heart disease and cancer.
  • Art Vandelay On the right spec truck, that is a screaming bargain for the price. And you can buy it safe knowing that as it is a Ford you'll never have your vehicle's good name sullied by seeing EBFlex and Tassos puffing each other's peters in one...a nice bonus to the horsepower!
  • Art Vandelay Too small for Tassos and EBFlex to puff each other's peters in.
  • Spookiness I can see revising requirements for newer vehicles, like 3 years, but not for older. I live in a state with safety inspections next to a state without, within a common metro-area commute "shed." Besides the fact that the non-inspection state has a lot of criminals to begin with, they're poorer, less educated, have a lot of paper-tag shady dealers, very lax law enforcement of any kind, and not much of a culture of car maintenance. It's all of their janky hoopties dead or burning on the side of the road every mile that farks up the commute for the rest of us. Having a car inspected just once a year is a minimal price of civilization, and at least is some basic defense against some of the brake-less, rusted-out heaps that show up on YouTubes "Just Rolled In."
  • Pippin Republicans Senators - "We refuse to support your nomination because you don't have a background in traffic safety! That's the priority!"Biden nominates someone with a background in traffic safetyRepublican Senators - "This new nominee is totally unacceptable! They're in favor of new regulations to improve traffic safety! We need big government out of (men's) lives!"