SCDigest Editorial Staff
The Obama administration’s decision last week to hit Chinese-made tires imported into the US with tariffs starting at 35% is causing an interesting and, ultimately, important game of global trade chess on both sides of the Pacific.
The tariff came in response to complaints from the United Steel Workers Union, which represents workers in many US tire plants, that China was unfairly subsidizing its tire manufacturers, and that those companies, as a result, were “dumping” tires into the US market, meaning selling them below actual costs.
China has immediately taken several actions in response, with the Ministry of Commerce saying it is being hurt by “unfair trade practices.” Having already taken a big hit in export volumes and related manufacturing jobs as a result of the global recession, which has hit US and European imports especially hard, the Chinese government said that as many as 100,000 jobs could be “affected” there as a result of the tariff action.
While the domestic China economy has stayed relatively strong, many believe it has been largely propped up by the government’s stimulus spending, which can’t last forever. On the export side, volumes there have continued to plummet, down by 23% year-on-year in both August and July and 21.4% in June.
Of course, US union leaders and many others view the situation differently.
"I believe it would have been an abdication of responsibility if we had not carried through on the legal obligation we had to protect from (an import surge). We suggested ways to reach a negotiated solution and that (failed)," Larry Summers, director of the National Economic Council, said this week.
Moves and Countermoves
China has called for talks with the US at the World Trade Organization over the tire issue, while simultaneously saying it was going to look into complaints by Chinese companies that US firms were selling poultry and auto parts into some China markets at below cost.
(Global Supply Chain and Logistics Article - Continued Below)