Monday, September 14, 2009

looming trade war?

the story this morning is China's response to the recent tariff on tire imports; the sequence of articles ive seen follows:

U.S. Adds Punitive Tariffs on Chinese Tires - NY Times - In a break with the trade policies of his predecessor, President Obama announced on Friday night that he would impose a 35 percent tariff on automobile and light-truck tires imported from China.
The decision is a major victory for the United Steelworkers, the union that represents American tire workers. And Mr. Obama cannot afford to jeopardize his relationship with major unions as he pushes Congress to overhaul the nation’s health care system

Barack Obama Does Something Really Stupid: Tire Tariffs - Brad DeLong -- Let's see... 250 million cars in America... need 4 tires per car... need new tires every 2.5 years. 400 million tires a year... $1.4 billion dollars a year... 10,000 worker jobs saved... $140,000 dollars per worker-job per year.
Looks like we could (a) let the Chinese sell us tires, (b) tax each tire by $2.50, (c) pay each tire worker who loses his or her job $100K a year, and we come out ahead: American households have more money to spend on other things, China has more jobs to help what is still a very poor country grow, and tire workers have higher incomes and more leisure as well.

China Investigating U.S. Exports - NYTimes - China unexpectedly increased pressure Sunday on the United States in a widening trade dispute, taking the first steps toward imposing tariffs on American exports of automotive products and chicken meat in retaliation for President Obama’s decision late Friday to levy tariffs on tires from China. The Chinese government’s strong countermove followed a weekend of nationalistic vitriol against the United States on Chinese Web sites in response to the tire tariff.

US tyre duties spark clash - Financial Times - A full-blown trade row erupted between the US and China after Beijing accused Washington of “rampant protectionism” for imposing heavy duties on imported Chinese tyres and threatened action against imports of US poultry and vehicles. Trade relations between two of the world’s biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tyre imports on top of an existing 4 per cent tariff.

China Reacts Quickly and Badly to Tire Tariffs - Yves Smith - when the US imposed stiff tariffs on imported tires from China late on Friday, we noted, “This could get interesting in a bad way.” The Chinese responded quickly over the weekend to announce they were investigating US auto parts and chicken, which together account for roughly as much as the disputed tires ($1.2 billion versus $1.3 billion for tires). The Financial Times branded the harsh reaction from China as elevating the US action to “a full-blown trade row.”

edits/updates: an editorial from the Economist:
Barack Obama does a bad thing

Economists React: China Tariff “Disappointing” and Timing “Unfortunate” - WSJ - capsule comments from several blogs, with links to the blog articles...

Murder-Suicide in Chimerica - With this trade war looming, one must wonder if Chimerica, the marriage of China and America as one economic entity, will end in murder-suicide, taking the global economy down with it. I now see a trade war between China and the United States as the biggest threat to global economic recovery.

in terms of total overall trade, tires, car parts and chickens are relatively small, but as a few have noted, this can get ugly fast...hasnt Obama heard of the effect of the 1930 Smoot-Hawley Tariff Act?


  1. a slightly related story:

    Ghost Fleet of the Recession - The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Container ships, bulk carriers, oil tankers – all should be steaming fully laden between China, Britain, Europe and the US. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination – and is why your Christmas stocking may be on the light side this year. (article incl. satellite photos)

    (fyi: hyperlink written in html, so it can be done)

  2. AH HA

    wonder if this is why DRYS stock is in major accumulation....

    DryShips Inc. owns a fleet of 40 drybulk carriers comprised of seven Capesize, 29 Panamax, two Supramax, and two newbuilding drybulk vessels, as well as two ultra-deep-water semi-submersible drilling rigs and two ultra-deep-water newbuilding drillships. The Company’s drybulk fleet carries a variety of drybulk commodities including coal, iron ore, and grains, bauxite, phosphate, fertilizers and steel products. DryShips Inc. employs its drybulk vessels under period time charters, on bareboat charters, in the spot charter market and in drybulk carrier pools. Its subsidiaries include Ocean Rig ASA, DrillShips Investment Inc. and Primelead Shareholders Inc.

  3. 8, I would be confused as to why there would be accumulation on the stock if shipping is grinding to a halt. I can be dense about these things sometimes. It would seem to me that even though they are really just leasing the ships they own out to others, if those others fold and can't make payments they may be in trouble.

    This is interesting. I looked at the profile of this company and tis was in the last paragraph:

    "As of December 31, 2005 the Company employed two persons."

    A market cap of $1.78 billion and just two employees. Sounds like a boiler room operation.

  4. this tariff thing is looking more ominous as is progresses...and krugman, who has some influence with Obama, is talking carbon tariffs:

  5. tburcher...I seldom question why anymore...but its this could be from folks averaging down an prayin some money'll come in save them...about 2 wks we'll have a better idea...until then the owners are crooks and couldn't hide it when times were decent!