Trade Tensions Flare between U.S., China As G-20 Nears
In 2009, President Barrack Obama was encouraged to impose tariffs on automobile and tires imported from China. With the closure of more American tire factories, America sought to control the global market.
What are tariffs? Tariffs are taxes imposed on goods entering or leaving a country.
Why did President Obama’s decision to impose tariffs on imports of tires from China create so much controversy?
The new tariffs on tires imported from China have damaged the legitimate interest of Chinese companies. The China is accusing the U.S of promoting a business environment that is not free and fair. The new tariffs have had an adverse effect on the economy of China. This has been facilitated by a dramatic drop of 23.6% in the Chinese tire export to the US. Many other drops have accompanied this since 2009 (Andrews, 2009).
Who benefits from the tariffs? Who could lose?
Both countries could experience massive loss of jobs. Trackers jobs for truckers who would have been hired to haul millions of tires from China will be lost. This will in turn be replaced with the high cost tires. U.S will be the greatest loser because most of its companies will no longer have anything to sell to their customers who are used to cheap tires, which they can afford. This may result to closure of many companies accompanied by loss of duty on millions of tires from China (Brown, 2009).
The new tariffs were only imposed on tires imported from China and not other countries. The new tariffs are not justified as they have discriminated against China. Chinese diplomats argue that the tariffs violate the nondiscriminatory principle since they are only imposed on Chinese tire producers. China is planning to retaliate by imposing import tariffs on chicken products from America. This is dangerous because the U.S could retaliate resulting in an excessive trade war. According to analysts, it is still not clear whether the tariff on chicken will trigger any retaliation (Andrews, 2009). However, it is evident the political environment between the two countries is getting more contentious. Although consumers and workers in both countries are the ones feeling the real costs, international regulation calls for the protection of businesses from such unfair trade practices.
The U.S has no basis for the current action against China. America is simply trying to put restrictions that would reduce Chinese imports on the market. The imported Chinese tires are cheap and have flooded the American market, which has resulted to a significant loss of American jobs. The rising of Chinese-made tires is a clear indication that the U.S tire industry recognizes products from China as a threat (Brown, 2009).
According to economic analyst, the current trade tensions between China and U.S is likely to affect the global financial outlook. It is believed that if the tension persists, global oil priced will escalate leading to a disruption in supply. This is likely to have a serious effect on China’s emerging economy. Such economies have been acknowledged as the motivation behind the global economic growth. If the path on retaliation continues, neither country will veer. This could result to ugly scenario, which could escalate and hinder increased production in both countries. This would be enough to discourage global economic recovery, (Brown, 2009).
Obama must balance between his political ambitions, the interest of the US tire industries as well as the free and fair international trade regulations. It is evident that imposing tariffs specifically aimed at affecting one country, is indeed a breach of the regulations. As much as he desires to remain in power, the president is acting out of pressure form his political patrons. Obama is disturbed by the likely effect of volumes of imported product competing against US products. It can be noticed that China is not to blame for selling low priced products. However, Obama argue that China should be punished for selling products needed by Americans at extremely cheaper prices. Obama’s actions are likely to make many Americans lose their jobs. On the other hand, he will encourage more job creations in other countries (Andrews, 2009).
References
Andrews, E. L. (2009). U.S. Adds Tariffs on Chinese Tires. The New York Times. Retrieved on
June 6 2012 from http://www.nytimes.com/2009/09/12/business/global/12tires.html
Brown, J. (2009). Trade Tensions Flare between U.S., China as G-20 Nears. PBS NewsHour.
Retrieved on June 7 2012 from http://www.pbs.org/newshour/bb/asia/july-
dec09/trade_09-15.html
