Updated 9/14/09 1AM ET
President Obama has poked China in the eye over tires manufactured in their country because of a petition filed by the Steelworkers Union. American consumers should likely expect to pay more for tires in the future because of the incident.
As an interesting sidenote: Ron Bloom, a fierce advocate of the “Cash for Clunkers” program who served as special assistant to the President of the United Steelworkers Union since 1996 when assigned head of the Auto Recovery Task Force was named Manufacturing Czar to the White House on September 7 (Labor Day). The Pittsburgh-based United Steelworkers Union has 1.2 million members.
Chronicled by date — you’ll see China has poked the United States back.
While the country continues to argue over health care, a more serious matter has been materializing this weekend. China has made a gesture of retaliation to our US government over the announcement of new trade protection tariffs to be imposed on China for tires.
Friday, September 11, 2009 — With a slow news cycle, the Obama administration announced late Friday that a hefty tariff would be levied against China for tires imported into our country. This move is referred to as trade protection which is strongly discouraged – especially during times of economic struggle.
In a petition filed by the Steelworkers Union, the US International Trade Commission placed an investigation of allegations that China is flooding the US marketplace with passenger car and light truck tires.
In response to the investigation, President Obama chose to impose a punitive tariff on China. Beginning Sept. 26, a 35 percent, 30 percent and 25 percent tariff will be imposed in the coming three years, respectively, on the tires in addition to the current 4 percent tariff in spite of negotiation attempts.
Saturday, September 12, 2009 — China’s Ministry of Commerce said the U.S. had violated the WTO (World Trade Organization) rule by this decision. Since the outbreak of the global financial crisis, commitments were made at the G-20 financial summit when leaders from around the globe – including President Obama — opposed trade protectionism because it would slow economic recovery.
China contends that since their tires primarily enter the maintenance market and the U.S. tire producers have shown no apparent changes in their business situation there exists no direct competition between China’s tire products and the U.S. The slowdown in the US tire industry is the result of the global downturn rather than increased tire exports to the U.S.
China said U.S. lacked bases for the case because tire products exported to the U.S. from China had actually declined 16 percent in the first of this year, compared to the same period last year. China’s tire exports to U.S. in 2008 only rose 2.2 percent from 2007.
China’s tire exports to the U.S. tripled between 2004 and 2007 while, during the same period, U.S. tire manufactures doubled profits. Four U.S. tire companies –Bridgestone/Firestone, Goodyear, Michelin and Cooper — manufacture in China and account for two thirds of the exports to the U.S. It appears that the U.S. government is penalizing it’s own companies for stepping away from union jobs to make cheaper goods. Remember…the union filed the complaint.
China said it reserves the right to bring the case to the World Trade Organization and may not ship tires for the first tariff year.
On Sunday, September 13, 2009 – China launched anti-dumping and anti-subsidies investigations into some automobile and chicken products originally produced in the United States. In effect, China is now charging the US with the same allegations.
The announcement from China is termed under the same policies, laws and allegations that the US accused China of.
Allegations that the US goods entered China’s markets with an “unfair competition manner”, which harmed domestic industries. The investigation was in accordance with the World Trade Organization rules and China’s laws.
Additionally, China stated that it always firmly opposes protectionism. The country hoped all countries worked together to promote a quick recovery of the world economy.
China has pointed it’s proverbial middle finger back to the United States.
Not only has the US created an antagonism through what may result in trade wars – but lets not forget China is a major player in supporting funds for our debt by buying our US bonds.
China is the second largest trading partner with the U.S. and vice versa.