President Obama fired the first shots in a trade war on Friday when he signed an order increasing tariffs on tires imported from China by a whopping 35%. This was done to appease his union supporters who are unable to compete with tires made in China due to high union wages and benefits.
Obama has enjoyed the help and support of unions in supporting his health care initiatives and it looks as if it’s time for the first installment of the expected payback.
China is understandable furious and is expected to slap tariffs on American Poultry and Automobiles.
a story in the Financial Times states:
Chen Deming, China’s minister of commerce, condemned the decision, saying that it “sends the wrong signal to the world” at a time when Washington and Beijing should be co-operating to deal with the worst economic and financial crisis in decades.
“This is a grave act of trade protectionism,” Mr Chen said in a statement. “Not only does it violate WTO rules, it contravenes commitments the United States government made at the [April] G20 financial summit.”
This president is far too inexperienced, surrounded by incompetency and is so arrogant he is unable to see that he has sent the country into a rapid tailspin. China is the only country left that is willing to buy our debt and now he has caused a trade war with them.
In an unbelievable response, the Obama administration warned China that they would complain to the World Trade Organization if China retaliated.
Eswar Prasad, professor of trade economics at Cornell University, warned that the disagreement could escalate.
“These protectionist measures, some of which amount to domestic political posturing rather than substantive restraints on trade, could easily ratchet up into a full-blown trade war and inflict serious economic damage on both countries,” he said.
2012 cannot come soon enough.