U.S. and China: Protectionist Straws Piling Up

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Although it is never really clear until after the fact which adverse development will be the one that breaks the camel's back, one thing is clear: each addition to the overall burden draws us that much closer to the breaking point.

With two of the world's biggest economies now engaging in a subtle but intensifying game of protectionist tit-for-tat, how long will it be, as the headline of a post at BusinessWeek's Eye on Asia blog puts it, before we do, indeed, see an all-out "China-US Trade War?":

One more sign that trade tensions are heating up between China and the world: as announced on the Ministry of Commerce’s website today, Beijing will impose tariffs as high as 37.5% on a kind of chemical (polyamide-6/6 chips, is its full name) used in manufacturing plastics and textiles, and imported from the U.S., U.K., Italy, and France, as well as Taiwan.

That follows Washington’s decision last Wednesday to start an anti-dumping and anti-subsidy investigation against Chinese steel pipe imports, and an earlier decision a month or so ago to slap tariffs on China-produced automobile tires. The E.U. for its part levied tariffs against China-produced screws and bolts early this year. Beijing which has been voicing its concerns about rising protectionism for quite some time, and already filed a complaint with the WTO about the U.S. tariffs on tires, is about to do the same with the E.U. tariffs on metal parts, Bloomberg is reporting.

Mofcom too had choice words over the weekend about what it sees as protectionism focused particularly on the pipe investigation: “Blind accusations of dumping or subsidies in Chinese imports is lacking in factual basis, which China strongly opposes.” With president Obama due to make his first head of state visit to China next month, all eyes will be watching this potential trade war now brewing.

Comments

[James Lewis:]

So Far the Trade War has been very very weak. The Mercantilist abuses that have emanated have been huge and the world has reacted very weakly. This sends a very weak message to beijing. It really is time for the deficit countries to illustrate their true determination to reduce their trade account. After all is this really protectionsim or simple international trade balancing.

Tariffs need to be used to reduce trade in 10% of the trade between China and USA. This will serve as a very clear message that the USA has every intention to balance its trade. If the USA is not brave enough to act with leadership, then they will pay very dearly and will give up huge economic and eventually military power to China.

Those that belive conflict is not the answer to resolving issues does not appreciate the determination of China to become the economic and military superpower. Protectionsim is the only way, a large escalation followed by new agreements to balance trade is far better than a slow escalation. After all the slow escalation does not serve the purpose of forcing China into balancing trade. It juts gives them more time to assess the best way to harm US companies operating in trade zones in China.

It would be a very good time for USA and other western manufacturers to start pulling out their technology from the free trade zones. If there was a huge escalation China would start to confiscate anything that would benefit them.

Oct 13 03:17 AM

[Ben Gee:]

The trade gap is narrowing between the US and China this year because the US is openning its high tech export to China. Will duties put on Chinese products help the US employment situation? Or will it reduce economic activitities? I think it will hurt the US economy more than it help. A trade war will hurt many countries. It will delate the recovery.

Oct 14 08:26 AM

[coreopsis:]

Protectionism is music to the ears of many serious strategists in China...perhaps even to the Japanese and other powerful Asian countries.

Perfect example: Westinghouse sells their nuclear business in 2006 to....Japan, which offers the best price (Toshiba). Now they're swimming in business from....China, which is using that technology in 13 new nuclear facilities on the drawing boards.

Short end of the stick: USA. Talks big --- and walks.

When the rest of the world gets the hang of protectionism, the US will be left to fend with domestic sources of supply for almost everything.

Anyone want to be whether living standards go up or down?

Oct 17 03:58 PM