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If you haven’t heard by now, President Obama heeded the complaints of the United Steelworkers’ union and slapped a punitive 35% tariff on Chinese produced tires.  This has sparked anger in Beijing and China vowed to investigate poultry and automotive parts imports from the United States.  China is also filing a formal complaint with the WTO.  So who does this really benefit?

First of all, I don’t think this  benefits the Obama administration because they really need to sustain a good relationship with Beijing.  Even though the tire industry is a small part of the trade between the two countries, the Chinese government definitely sees this as a grave insult.  The Chinese commerce minister Chen Deming said that this act is “an abuse of special safeguard provisions and sends the wrong signal to the world”.  Frankly I don’t think it is worthwhile to anger China over a tiny percentage of trade between the two countries just to yield to  some political supporters.

Next, this will probably hurt Americans more than the Chinese. The poultry industry is now on edge because they export tons of chicken feet and wings to China at a premium price.  If China imposes a tariff on them they will lose quite a bit of profit.  The USA Poultry & Egg Export Council expressed that they are ““.   The New York Times published a particularly amusing article on this matter which said that the , but Chinese people are also very price conscious so any increase in price will bring consumption down.  The poultry industry is right to be concerned, because those chicken feet are fairly worthless here in America.  Suppose that this tariff protects $1 billion in domestic tires, but loses $2 billion in chicken exports, then American workers still lose as a whole.

Another way this hurts Americans is that the tariffs will increase tire prices.  Most of the Chinese tires are cheap low end products.  American manufacturers such as and import them to the United States.    The tariffs on Chinese tires will inevitably increase prices for American consumers who buy the lower end tires.   Additionally, if manufacturers had to increase the price of their low end products they would probably increase the price of their premium products to make their products seem more “premium”, and that means more expensive tires for everyone.Americans are also very price conscious right now, and the higher prices might mean lower sales, and ultimately that might hurt the American tire industry and decrease jobs in that sector anyway.  In that case this protectionist measure would have accomplished the exact opposite of its purpose.

So who really benefits from this?  I think the trade lawyers should be happy because Obama pretty much open the doors for more similar complaints from every other industry.  In Bush 43′s administration four similar industry complaints were rejected because Bush wanted to keep trade free.  Now Obama is sending a signal out there that he is willing to approve protectionist measures for small groups that he favors so more groups may be hiring up lawyers to file complaints because now they have a bigger chance of getting their petitions approved.  Although , whoever files them will be getting a fee. So in the end, I think  the lawyers win.

Ultimately, I highly doubt that this tariff on 0.4% of China’s exports to the United States is going to turn into an all out trade war, but it is certainly making Obama less popular to everyone except the specific unions that he is agreeing to.  Decisions like this affect a lot more than just the people making the complaints, and it is probably wiser to reject them all like Bush did.  That way at least it looks like there are no favorites.

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levitra cialis viagra comparisonon 09.16.09 at 6:53 pm

Xin – I agree with your thesis. In the end, Americans suffer through higher prices in tires or other reactionary tariff measures.

The one thing I will have to say is that that at least the United Steelworker’s union gains. When you spread benefits or costs over 300 million Americans, we can barely tell. Hence, our suffering on higher tire prices in the end is diminutive, and I am glad that collectively, we can help our brothers out at the United Steelworkers union.

levitra cialis viagra comparisonon 09.20.09 at 9:19 pm

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levitra cialis viagra comparisonon 05.13.10 at 1:16 pm

The Cornel’s special recipe is not enough to keep America’s chicken industry thriving, what they needs is the added ingredient of China. However, tariffs imposed by the United States to help American steel workers in the tire price war may cause one battle to be won at the sacrifice of the chicken industry. Didn’t we learn our lesson in grade school: if I hit him, chances are he’s going to hit me back?

The question isn’t whether or not China will hit us back but can who throw the stronger punch. Hopefully America’s size will account for something in this match. And not the size of our military or wallet, but the size of our belly’s. America’s affection for white meat might mean the difference between a win or a draw. The pure size of America’s chickens legs and wings gives the U.S. chicken industries literally a leg above the rest.

U.S. industries should take a lesson from this: market yourselves as the biggest, strongest, or best and consumers both in the U.S. and abroad will want to purchase your product no matter if there is a cheaper option available.

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