U.S. and China: Protectionist Straws Piling Up

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Includes: FXI, PGJ
by: Michael Panzner

Camelsback

(Image source)

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.