By on December 15, 2011

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.

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28 Comments on “Trade War Watch 20: China Slaps Tariffs On American-Built Large Cars And SUVs...”

  • avatar

    China challenged the tire tariff in the WTO and basically lost. WTO wasn’t interested. I hope that the US government challenges China in the WTO on this. On the one side it was obvious dumping, on the other hand, I don’t think the USA is dumping cars, Chinese manufacturers don’t make cars with large engines with the exception of Joint Venture vehicles.

    It will be interesting to see where this goes. Hopefully the USA plays smart here, but we’ll see.

    • 0 avatar

      A trade war would be good. Nothing like a good old trade war to whittle the markets down to size. And it may even drive some entrepreneurs to re-open manufacturing businesses inside the US if Congress enacts laws that benefit production inside America instead of outside America.

    • 0 avatar

      Its not the WTO wasn’t interested, its that WTO ruled in the US’ favor this last September. The reason China lost its tire case was because when it entered the WTO it signed a WTO Accession Agreement that allowed the US to impose these tariffs in the language of the agreement.

      China obviously thinks this is not fair, the US stance has been that China has not followed a lot of their Accession Agreement, particularly on agricultural imports, so push has come to shove a long time ago. This is not tension that suddenly started with the tire tariff- far from that.

      Obama has been very confrontational with China; much more so than other administrations. We obviously have the tires, blunt currency manipulation accusations, the solar panel issues, Obama’s unfiltered words at the last APEC meeting and China’s exclusion from the Trans-Pacific Partnership.

      China is pushing back. But fair or not, their WTO stance on imposing these tariffs may not be on solid ground as the US’ tire tariffs as the US is not bound by an Accession Agreement as China is.

      Personally, I think its poor policy for China; perhaps more reactionary than strategic. A trade war isn’t something China can win at the moment, there is still issues with the solar panel imports and the Currency Exchange Rate Oversight Reform Act to think about. Obama may actually revel in an economic confrontation with China by utilizing nationalist sentiment to project an image that he is fighting for US jobs for the sake of a failing US economy.

  • avatar

    Sweet justice.

    The U.S. raised a tax, driving up the cost of tires for U.S. people who least can afford expensive tires at this time.

    The Chinese hit back, taxing the built by Government Motors.

    What’s not to like? Payback time for the tax hikers.

    • 0 avatar

      It does seem like justice. It is just too bad that we have to live with an economy being cored out by the Saboteur in Chief.

    • 0 avatar

      vwww12, you are right on this. Before the tire trade tarrif, poor people were able to purchase new tires at low prices. But, Obama decided to prop up union tire worker jobs with this tarrif. So, now poor people are driving around on old tires, because new tire prices have surged. Fact is poor people need low priced Chinese products.

      The Obama adminstration’s actions in the restructuring of GM and Chrysler also protected union jobs, and that one reason why car prices are rising. This also hurts poor people.

      This union stuff needs to stop.

  • avatar
    Educator(of teachers)Dan

    Tit for tat, that’s how trade wars work.

  • avatar

    I am with highdesertcat here. China is essentially dumping everything it exports, due to keeping the yuan down. If Obama really wanted to help the U.S. worker, he would really pressure China to let the yuan rise.

    • 0 avatar

      Yeah, but the catch is that China is keeping the Yuan down by selling Yuan and buying US Dollars. They then park those dollars in US government bonds. So if China were to stop manipulating the Yuan, they would massively reduce their purchases of US government bonds, something that the US can’t really afford to have happen right now because of the size of the deficit. Which is why you won’t hear much chest-thumping about Yuan manipulation out of US govt officials these days.

      PS – Further detail for those interested: the Chinese issue local bonds (which the Chinese people, being net savers, snatch up), and then sell the yuan the Chinese people gave them for those bonds in order to buy dollars. This is called ‘sterilization’ because it doesn’t increase the money supply (which would be inflationary), which would happen if they just printed yuan and traded them for dollars.

      • 0 avatar

        Did you forget about the Fed’s QE programs? Trillions of USD printed. I don’t understand what the US is complaining about. The Chinese are the ones that should be complaining about currency manipulation by the US.

      • 0 avatar
        John Horner

        Of course the reason China has all of those excess US dollars in the first place is due to the massive trade imbalance.

    • 0 avatar

      Wrong. In China, you have people willing to work very hard. And these people are not asking for American style wages and benefits. So, their products carry a lower price tag. If America had some of this work ethic without excessive compensation demands, everything would be made in America.

      This whole dumping argument is propaganda being pushed by union types. They hope you will not realize the unions are the disease destroying the American economy.

  • avatar

    China complaining about another country “dumping” goods is laughable. Let’s be serious, China’s entire export policy is based on government subsidies and dumping of products.

    • 0 avatar

      And their import policy is built on government-endorsed intellectual property theft and expropriation of foreign investments.

      This isn’t a great big deal on its own, in terms of repercussions to the automakers involved. But if it leads the US to take the case to the WTO or, dare to dream, actually systematically standing up for US businesses in China, it could be the start of something very good.

  • avatar
    Andy D

    mebbe we should stop shipping them GA made chopsticks

  • avatar

    Who cares if the Chinese government wants to force their well to do people to pay more for big American cars.
    One of these days the master planners will realize these tactics have little real effect, especially when suitable replacements don’t exist. This will encourage other brands to raise their prices and profit from the meddling in the market.
    Here in the USA we have very few tire makers left to protect, something the nitwits we have in charge fail to understand. And the business climate does not support new startup tire companies.

    • 0 avatar

      Goodyear’s union employees went on strike for several weeks in 2006, at a time when the company hadn’t made a profit in years. I spoke to people who’d been in the factories, and the employees were caricatures of stereotypes of useless union thugs. The business climate doesn’t support any legitimate business start up, just scams to take advantage of our corrupt and corruptive government.

  • avatar

    China is perfectly justified in putting huge tariffs on GM and Chrysler products.

    The US gave those companies a competitive advantage by handing them a $95 billion dollar welfare check and a $45 billion tax write-off carry forward from bankruptcy. This puts other auto manufacturers at a disadvantage. The tariff compensates for that.

    Just one more reason the government should not be picking winners and losers in a free market economy.

    • 0 avatar

      Oh, PUHLEASE! With the money that the Japanese government, banks and the hapless Japanese consumers directly or indirectly gave the Japanese 5, the 2009 Detroit bailout was a $10 bill in the mail from grandma at Xmas.
      You really must believe Japan Inc’s press clippings. Yes, yes, America made crappy radios, crappy televisions, crappy computers and crappy cars – that’s why Japan, Korea and China are about to eat our lunch. Of course, billions poured into devaluing the yen over the past 30 years had NOTHING to do with it. (Don’t believe me – why is the yen skyrocketing NOW? Could it be because the Japanese banks, taxpayers and government has about a trillion dollars in clean up to do form last March’s earthquake and the cupboards are bare?)
      Deliberate and methodical targeting of North American markets in the ’60s and ’70s by MITI had NOTHING to do with it.
      If we do not wake up and actually see what Japan, Korea and China are accomplishing, then we deserve everything that comes our way.

    • 0 avatar

      jmatt, very good understanding.

    • 0 avatar
      John Horner

      jmatt, you do know that the Chinese government owns all or part of many of the Chinese auto makers, yes? You do know that Chinese government owned banks give sweetheart deal loans to favored companies, yes?

  • avatar

    The site has been sorely missing these type of pieces over the last week. Ed don’t go!

  • avatar

    The West is already finished. All that is left is for the curtain to drop.
    Any serious debate about trade policies with Asian countries gets drowned out by the lobbyists and Fifth Columnists that live on THIS side of the Pacific but whose allegiance is still on the OTHER side.
    In the 1950s and ’60s, Japan pioneered the way. Korea gift wrapped it. Now China is sending it back, C.O.D.
    The next 20 years are going to be very, very interesting. Each President that steps up after the next election is going to have to put Asian trade at the very top of their priority list. (Canada doesn’t count because even our Conservative Prime Minister is too busy kissing up to the Chinese, figuring it will act as a counterbalance to American economic influence over the tundra. Ha, just wait until the Chinese build an oil rig off Baffin Island, then see who Ottawa runs crying to!
    (Lucky for Obama that the northern aboriginals will keep that pesky western pipeline tied up in the courts until the tarsands dry up, otherwise Alberta oil will end up in Beijing, not Houston.)

    Those with agendas and axes to grind will try to confuse trade issues, but in the matter with China in particular, there really are only 2 points that matter:
    In 2001, the United States had a trade deficit with China to the tune of $83B. In 2010, it was pegged at $273B. This not only represents a mass exodus of U.S. currency out of the country, millions of jobs and a lot of technology went with it. (Or are you not reading this post on a Made in China LCD screen, and typing your well reasoned, witty rebuttal on your Made in Korea keyboard, powered by your Made in China PC/Mac/notebook?
    The other material issue is the status of the U.S. current account. which is not pretty. The current account is really a more accurate way of measuring how a country’s economy stacks up against its peers. While China enjoys a $305B SURPLUS with the world (mostly the U.S, BTW), the United States is running a current account DEFICIT of $470B, give or take a few Wall Street bailouts.

    Although trade wars can be nasty, and there undoubtedly would be short term pain, looking at these sobering figures – just who is benefiting from this so-called ‘trade?’ It’s only trade if your customer wants to buy something from YOU. North America has very little China wants, other than perhaps land and resources, but for now they are content to buy up South America, East Africa and Iceland (apparently.)
    If China wants a trade war, I say Bring It! I am sick to death of replacing 30 year old Made in North America appliances that were hand-me-downs from my parents, with Made in China crap that self destructs after 3-5 years. A $30 blender at Wal-Mart is no deal if you have to buy THREE of them!

    My fellow countrymen, who are snapping up Kias and Hyundais like crazy, should not be so smug, either. Canada has gone from a net trade exporter (for, like, forever) to 8 or 9 consecutive quarters of negative current account balances, thanks largely to Canadian’s penchant for Korean vehicles. (Not surprisingly, the transport sector of Canada’s trade sheet has gone sharply into the negative over the same time period.) We Canadians are vying with Great Britain for a race to join America near the bottom of the current account losers. Ours is flying passed $50B in the red!
    It is a sign of the times when I was browsing through a huge Indigo books store downtown and while browsing the languages section (still looking for a ‘fun’ Portuguese/English computer game, ha ha) I stood in stunned silence as I noticed a plethora of Mandararin/Cantonese primers on the shelf. No Portugese, though. Interesting, indeed.

  • avatar

    I am not surprised by this, and I bet the US tries to fight it too.

    The problem with the US tax on tires is that the cheap tires were made in China and the good tires were made in the US. All this has done so far is drive up the cost of all tires. We may have stabilized the jobs in this industry in the US, but we did it at a very large cost to buyers.

  • avatar
    John Horner

    From January through October of this year, the US bought 245 Billion dollars more worth of goods from China than China bought from the US.

    Yeah, the US is really being unfair to China ?????

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