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Nothing Good Will Come Out of Obama's Tire Tariff

My column at American Issues Project is about President Obama's Chinese tire tariff. Nothing good will come of it. It's not only poorly timed, but it shouldn't have been applied at all. Here's a portion:

American consumers are going to take a big hit with this tariff. The price of tires will necessarily go up. The Wall Street Journal believes they will increase by as much as 30 percent and notes this price increase will affect the low-end priced tires. At a time when Americans are looking to save money where ever they can, this increase will hurt. Tires are not a luxury item that consumers can cut from their budgets and not be affected. People need to get to work, so if a tire goes flat it must replaced. If a tire that normally costs $100 goes up to $130, this can impact a family's budget. Increased prices on necessities mean less money to spend on other goods and services. The increased price also leads to an issue that the president probably hasn't considered: safety. Some consumers may choose to drive longer than they should on balding tires in an effort to stretch their dollars further.

It has been consistently argued that America and China need each other, which, historically, is true. China buys our debt, and in exchange Americans purchase billions of dollars of Chinese products. Circumstances are changing, however. China may not need us as much as we think.

While the United States flounders in a lingering recession as a result of unending debt and America's unemployment rate approaches double digits, China's economy and its middle class are exploding. By 2020, China's middle class will reach 700 million people. That is a huge number of Chinese consumers who can buy Chinese made products. Additionally, the markets and economies in Asia seem to be rebounding faster from the global recession than the West, opening up alternate markets for Chinese and Asian made products. This can create a "decoupling" effect from Western markets. While some have dismissed the theory of "decoupling," market analyst Peter Schiff, who correctly predicted the global meltdown in the face of much ridicule of other analysts, says it is real. In fact, the theory is is gaining new traction as leading economic indicators show that Asia's economy is growing while the West's is stagnating. If Schiff is correct and decoupling is taking place, this tells us that China may not need America as much as much as it has in the past.

Unfortunately, we have put ourselves in a finanicial situation where we need China. With all the debt President Obama is incurring and the additional debt he wants to incur with his trillion dollar health care reform and cap and trade plans, we are not in the best financial position to turn around and apply tariffs on Chinese goods. As China's economy in particular and Asia's economy in general continue to grow, China could respond by not funding any more of our debt. It also could just as easily sell its holdings of US treasuries, which it threatened to do in 2007. We already know China is looking to diversify away from US dollars. Just last month, China sold $38 billion in treasuries. Obama's tariff may encourage them to diversify even further.

Read all of it. If you have any thoughts on Obama's first act regarding free, or should I say not so free, trade, please leave a comment here or at the article itself. While you're at AIP, be sure to stop by and read the other columns and blog posts. Matt Margolis asks if Obama will sign a bill that defunds ACORN, Jimmie Bise comments on Tom Harkin's exercise in semantics. Lorie Byrd explains why every American should be concerned about the ACORN scandal. TJ Brown is absolutely right when he says government made "rights" undermine our freedoms.


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Comments (12)

"China may not need us as m... (Below threshold)

"China may not need us as much as we think."

As you pointed out, China has already begun to start selling off US securities. They're not dumb, so will take the necessary time to shed their holdings and minimize their losses (which they've already accepted will occur). Just watch the demand grow to shift the world currency away from the US Dollar. The more we indulge in deficit spending, the faster that shift will occur. Be a pretty good indication of our diminished economic status when we wake up one morning and find that international trade is done in yen, not dollars.

On a bright note, the recession is over. Here in Kalifornia we lost fewer jobs in August then we did in July (good news unless you're one of those 'layed off'). AND unemployment has only RISEN to 12.2%! Hot damn! In the meantime cities continue to lay off workers, restrict library hours, office hours, court hours, and the state is set to release 22,000 prison inmates early. Things are looking up!

The Wall Street Jo... (Below threshold)
Mac Lorry:
The Wall Street Journal believes they will increase by as much as 30 percent and notes this price increase will affect the low-end priced tires.

Obama looked at the effect such price increases will have on the poor who can only afford cheap tires, and he considered the risks of pissing off the Chinese who could cause the U.S. great damage. Obama weighed all that against paying off the unions and decided to hell with the greater nation good, the unions come first. Obama knows he'll need every dollar and every vote the unions can provide to win in 2012. This won't be the last such pro union deal.

Too bad Barry isn't a fan o... (Below threshold)

Too bad Barry isn't a fan of history. He might want a seance with Herbert Hoover regarding tariff wars and what they can do to international trade. Barry might also want to Google "Singapore Ghost Fleet".

Besides, don't you know tha... (Below threshold)

Besides, don't you know that trade wars during the middle of a recession are a GOOD thing; just like tax increases and healthcare reform. Barry told me so.

This will jump start the ec... (Below threshold)

This will jump start the economy overnight alright.

What a dumbass!

The whole reason our econom... (Below threshold)
Morton Gray:

The whole reason our economy is in the crappper is because we don't MAKE anything anymore in this country. The banking problem and mortgage defaults was simply a result of that problem , not the cause. If the government allows the continued export of jobs to slave nations, we'll never recover. Tariffs are the only way to make a level playing field with nations that don't have ethical employment laws, which is the reason Chinese tires are so cheap. We must fall on the side of protectionism and invest in American business for the sake of the future. Every job exported is another $10,000 we owe China and another $10,000 a company saves on production personnel. The only looser is the American Dollar and the production plants in America that close. It's called the "Wal-Mart effect"and that's why we owe so much money to China. It's simple math. Free trade is only free when the labor laws and costs are comparable from country to country. Otherwise tariffs are an unfortunate necessity.

Liberals blame our problems... (Below threshold)

Liberals blame our problems on "exporting jobs" and everything they suggest (or demand) makes goods more expensive-tariffs so goods from other countries are more expensive, and "fines" for companies that produce goods out of the country, or who move out of the country.

But they refuse to address WHY companies move off shore, which is high taxes, excessive regulation and unions that demand everything but the kitchen sink for their members.

Then why buy anything from ... (Below threshold)

Then why buy anything from China at all? Protectionism is the only way to save the country then we should close our borders and completely cut ourselves off from the rest of the world. Right?

"Tariffs are the only way t... (Below threshold)

"Tariffs are the only way to make a level playing field with nations that don't have ethical employment laws, which is the reason Chinese tires are so cheap."

So every country decides what's "fair"? HINT: Countries invariably look out for their own best interest. I say INVARIABLY because of the current idiot in the WH. Check out what happened in 1929-1932 when nations began throwing up trade tariffs right and left. It was called a 'world wide depression'. You want that again? Read Sue's post. You 'get even' by finding out why you're not competitive and try to eliminate or minimize disadvantages. There was a time when unions had their place. Since the 60;s they've been more a drain than anything else. You're in Detroit. A light bulb burns out, stopping your work. You call an electrician TO CHANGE A LIGHT BULB. You're a union painter, as you work along a wall you find a stack of plumbing parts blocking your way. You can't touch the stuff to move it 2 feet. You call a plumber. And unions wonder why people are pissed off at them? "We get no sympathy". Wonder why? I was in a union for 35 years and saw some really stupid crap pulled 'because we can'.
Then we have politicians passing laws they don't bother to read or even understand - and have no regard for the consequences. "Let's up the minimum wage" - get more votes. So business complies AND RAISES PRICES. Gee, that really helped the consumer, didn't it. "Minimum wage" is ENTRY LEVEL WORK. Nobody starts out making the big bucks without experience or education. But hey, it gets the votes. As for our government, they still haven't learned that you should not spend what you do not have. You can't continue to borrow and borrow and call that "prosperity".

What good is manufacturing ... (Below threshold)

What good is manufacturing more in America if nobody else buys from us because of trade wars destroying the American market abroad? That would be the end result of this line of thinking, plus a poorer and marginalized America.
If you run a business of some kind but you are being outcompeted by another business across twon there are two ways to becaome competitive again. The conservative way is to cut the costs to your consumers and maximize your profit through inventiveness and trimming unesseccesry costs to you. The liberal way is to get in contact with you representative and bribe him to legislate your competitor out of the market. This senario goes double for international trade.
The same people who are whining about jobs going oversees are simultaneously making it more difficult for those jobs to exist in the US. We have one of the highest corporate tax rates in the world and some especially onerouse union and environmental legislation; if we want to become a leader in amnufacturing again that has to change and no amount of protectionism would get a similar result.

The "decoupling" that Schif... (Below threshold)

The "decoupling" that Schiff talks about has profound implications for American exceptionalism in the long term. For that to occur, two things have to happen, which are joined at the hip:

* First, the Chinese economy must reach a critical mass whereby domestic consumption can take up excess capacity and reduce its dependence on exports.

* Second, China must throw off its self-imposed yoke of "screw the other guy" in the markets, and begin innovating on its own.

As the demand for and quality of Chinese made goods rises, as it did in Japan through the 1970's, China has a large enough market to justify a massive manufacturing base. Anyone who remembers what a large heavy manufacturing base and focus on innovation did for America in WWII will grasp what this means for us geopolitically as time goes on.

Combine that with wilting US markets, manufacturing base, and wealth, and understand how horribly the parasites on the Left are crippling us.

It's frightening.

"Too bad Barry isn't a fan ... (Below threshold)
John S:

"Too bad Barry isn't a fan of history..."

Though technically born in Hawaii, Bambi grew up as a Muslim in a Muslim country and never received any instruction on U.S. history (or any history after the 8th century, for that matter). All he knows about the United States is what his Marxist friends told him when he first came to the U.S. as a teenager, later expanded by his angry America-hating wife and "God-damn America" pastor.

Amusingly enough, this lack of awareness of the Great Depression, leads him to make same mistakes as Herbert Hoover. I expect we'll see similar results.






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