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The Obama Administration Imposes Stiff Tariffs on Imported Chinese Tires

Travis's picture




 

The Obama administration will impose stiff tariffs on imports of Chinese-made tires after finding that a surge of imports has disrupted the U.S. domestic market.

(Wow, you really think Chinese imports have disrupted the U.S. domestic market?)

President Barack Obama signed an order on Friday to impose the special punitive tariffs for three years.  This action is the first major trade enforcement action of his administration and comes less than two weeks before the high-profile summit of the leaders of the "Group of 20" nations, including China.

This is the first time the U.S. government has imposed a special "safeguard" provision to protect a U.S. industry from Chinese competition.

"The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," notes White House spokesman Robert Gibbs said in a statement.

Taking effect in fifteen days, the tariff will be 35% in its first year, falling to 30% in the second year and 25% in the third. These tariffs will be on top of the current 4% tariff.

U.S. imports of Chinese tires have risen, almost tripled, from 14.6 million in 2004 to 46 million last year; about one-sixth of the U.S. market. Four U.S. tire plants have closed in the past two years alone, and more than 5,000 domestic workers have lost their jobs.

The United Steelworkers Union had complained to the U.S. International Trade Commission about the disruption. The ITC had originally recommended a stiffer 55% tariff for the first year, 45% the second and 35% the third.  And of course, the Chinese government objected to the tariffs entirely.

China claims these duties would be a violation of global free-trade principles and a clear sign of U.S. protectionism, a topic Obama too has spoken-out strongly against.

"This administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers," says U.S. Trade Representative Ron Kirk.  Further, "Enforcing trade laws is key to maintaining an open and free trading system."

Kirk also notes that China had agreed its trading partners could impose such sanctions when it entered the World Trade Organization.

Ponder and discuss.  This could get interesting.  Obama needs to placate the domestic labor unions for his reformed healthcare agenda, yet needs China's support, notably in nuclear standoffs with Iran and North Korea.  Lest we not forget, China is the world's third largest economy and a veto-holding member of the UN Security Council.  Oh, and what about the massive amounts of U.S. Treasury debt China currently holds?

Personally, I see the makings of a trade war, among other things.  With much at stake.  Trade aside. 

 

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Sat, 09/12/2009 - 01:04 | 67346 mattco
mattco's picture

Had to get support from the unions for his healthcare bill....

Change you Can believe in..... lol

Sat, 09/12/2009 - 14:57 | 67778 Anonymous
Anonymous's picture

Confucious say: Don't bite the hand that feeds you!
China doesn't buy treasuries = World of hurt...at some point they'll play their hand..........

Sat, 09/12/2009 - 22:48 | 67987 Lets_Eat_Amen
Lets_Eat_Amen's picture

in the phillipines they say:  "if I owe you one dollar, you're my master.  If I owe you a million dollars, i'm your master."  Of course, this neglects to include the continuation of borrowing but an interesting note all the same.

Sat, 09/12/2009 - 01:06 | 67350 Anonymous
Anonymous's picture

"This could get interesting"

I like to think that by this you mean "this could escalate."

Sat, 09/12/2009 - 12:34 | 67664 ZerOhead
ZerOhead's picture

Into a War on trade perhaps?

That'll go well with the current War on Terror, War on Drugs, War on Poverty, War on Reason...

Sat, 09/12/2009 - 14:33 | 67761 MinnesotaNice
MinnesotaNice's picture

Can we have czar's with each of those wars please... preferably a czar who can quietly make a tidy profit on the side...

Sat, 09/12/2009 - 15:00 | 67781 ZerOhead
ZerOhead's picture

That would be Lloyd

Sat, 09/12/2009 - 01:16 | 67355 Gubbmint Cheese
Gubbmint Cheese's picture

I'm sure there will be no hard feelings come auction time.... right?

Nothing personal China..

lol

Sat, 09/12/2009 - 09:05 | 67516 SteveNYC
SteveNYC's picture

Don't worry, we have Heli-Ben and his merry men. I now fully believe that the administration and the Fed believe they can fund every cent of treasury debt that the US needs, simply via QE and open market purchases.

These guys need to be stopped.

Sat, 09/12/2009 - 01:24 | 67358 russell
Sat, 09/12/2009 - 07:27 | 67475 Marge N Call
Marge N Call's picture

+100

My thoughts exactly. Things never change.

Sun, 09/13/2009 - 14:30 | 68208 ZerOhead
ZerOhead's picture

'At first things seemed to go well... then GDP collapsed by 50%'

ha ha ha... ha ho ho... ho oh ho... oh ho oh... no oh no... oooh no no no...

We're dead.

Sun, 09/13/2009 - 16:28 | 68250 Hephasteus
Hephasteus's picture

Partial success. It's vital part of failure.

Sat, 09/12/2009 - 01:23 | 67359 SilverIsKing
SilverIsKing's picture

Could anyone really be this stupid or is this the catalyst for blaming the Chinese for tanking the dollar?

Sat, 09/12/2009 - 14:53 | 67774 Anonymous
Anonymous's picture

Could possibly be the first intentional step towards
a full trade war. I guess the PTB has made no bones
about his intention to protect domestic blue collar
workforce. A very dangerous step indeed could easily
escalate and take the cost of living sky high.

The sick thing is that we want free trade when it
benefits us and no when it does not...and the PTB
go on and advise other countries to bring down trade
barriers.

I am thinking this could possibly be intentionally
done to repudiate our debt and bring manufacturing
eventually back to america.

Sat, 09/12/2009 - 14:58 | 67779 Mediocritas
Mediocritas's picture

Oh they really are this stupid. Again, the power of lobbyists shine through.

Nice one fellas, real nice. Piss China off when it has the you over a barrel...yeah, real clever.

Sat, 09/12/2009 - 01:33 | 67363 Cheeky Bastard
Cheeky Bastard's picture

DXY - 65.xx on Monday

Sat, 09/12/2009 - 07:48 | 67482 Anonymous
Anonymous's picture

I pray you're right. Shorted the dollar to the max that my shrivelling soul will allow.

Sat, 09/12/2009 - 01:34 | 67364 Fish Gone Bad
Sat, 09/12/2009 - 10:29 | 67562 Sam Clemons
Sam Clemons's picture

Yep, this stuff never works for the long run.  A black market import of Chinese tires will develop.  Because of the US tire makers now reliance on the govt to make them competitive their product quality will deteriorate while prices rise.  Why don't these moronic unions focus on making better tires for a cheaper price instead of relying on the looter US govt?  Now, we've directly hurt the people who facilitate our looting ways. 

Sat, 09/12/2009 - 12:32 | 67660 Hephasteus
Hephasteus's picture

They made better tires. Don't you remember firestones blowing out and causing SUV's to roll. That's better.

Sat, 09/12/2009 - 21:40 | 67960 ZerOhead
ZerOhead's picture

Resulting in fewer new SUV sales... that's worse...

Sat, 09/12/2009 - 01:37 | 67366 straightershooter
straightershooter's picture

Once again, who got hurt in this case? Those poor guys who had just become NINJA and who need ultra cheap, no name brand tires in order to make that all-vital job interviews. Congratulations! Unions. Once again, unions have successfully raided the poor guys by forcing them to buy higher price, union made tires, now that the tires unions don't make, but made by poor chinese workers are as expensive as those made by unions.

It is foreseeable that some NINJA will be forced to keep driving the dangerous tires and keep risking their lives on the road, thanks to the unions for padding their  own pockets.

As for poor chinese, they may not do anything in return at this moment. But return it will. Remember, Chinese are famous for their patience. It is never too late to take revenge even if it takes a 1000 year wait.

By the way, how do you hurt the no brand low price tire market which the US tire companies abandoned long time ago.

Sat, 09/12/2009 - 11:12 | 67585 E pluribus unum
E pluribus unum's picture

Since when are there job interviews?

Sat, 09/12/2009 - 01:48 | 67372 straightershooter
straightershooter's picture

Opps......

This is fast.  Heard from the chat that China will retaliate by blocking all US made tires from entering China.

Trade War, Trade war.......DXY 40?????

Sat, 09/12/2009 - 01:52 | 67375 Cheeky Bastard
Cheeky Bastard's picture

lol, in a year you will hear stories starting with a sentence like this : " Remember when the DXY was 22 ... " 

Sat, 09/12/2009 - 03:28 | 67420 straightershooter
straightershooter's picture

http://www.shanghaidaily.com/sp/article/2009/200909/20090912/article_413623.htm

I just found out that China sent #2 or maybe #3 leader to meet and warn Obama not to take trade protective measures. Now, obviously, China loses face and will react harshly to let Obama know that he barked the wrong tree.

Brace for the impact. Though TD said Bernanke would not be satisfied until DXY hits the headquarter of zerohedge.

OK, I hear your 22 bid. Anyone going for 20?

 

 

Sun, 09/13/2009 - 14:47 | 68211 ZerOhead
ZerOhead's picture

Part of the North American monetary union plan Cheeky. U.S. dollar = Mex peso = Union.

Thought you were up on this shit.

Seriously though the dollar has to fall if the country is going to become competitive again. Unfortunately this will have inflationary effects... and when combined with the accelerating Q.E. if they can't get the budget under control... plus the effect of rising interest rates on the residential commercial and industrial sectors... Crash2.0 and Bailout2.0... Crash3.0 and Bailout3.0...

Where is the bottom going to be? That's all I want to know. (rhetorical)

Sat, 09/12/2009 - 01:49 | 67373 Anonymous
Anonymous's picture

a few days ago chinese steel pipe tariffs were hiked !
Now its tires!!
also illegals may not be able to purchase health insurance (new plans)!
SIGNS OF INFLATION coming ?

Sat, 09/12/2009 - 02:07 | 67383 Anonymous
Anonymous's picture

YEAH, the last part of crisis will turn into DOG eats DOG and new de-leveraged normal spending habits of US consumer. The slogan will be: Don't buy if you don't have money. FOr reference see SNL - "don't buy if you don't have money."

FED will give up and let the credit supply to go back to equilibrium. GOV will gently break down financial institutions into the smaller compartments, and over saving rate will remain positive.
Otherwise the government will over- stretch itself and break down, witch will cause new political parties to gain power and maybe re-write constitution a bit, still we will remain somewhat of a democracy with relatively well defined bill of rights.

Sat, 09/12/2009 - 02:11 | 67385 Comrade de Chaos
Comrade de Chaos's picture

YEAH, the last part of crisis will turn into DOG eats DOG trade disputes and new de-leveraged normal spending habits of US consumer. The slogan will be: Don't buy if you don't have money. FOr reference see SNL - "don't buy if you don't have money." FED will give up and let the credit supply to go back to equilibrium. GOV will gently break down financial institutions into the smaller compartments, and our saving rate will remain positive. Otherwise the government will over- stretch itself and break down, witch will cause new political parties to gain power and maybe re-write constitution a bit, still we will remain somewhat of a democracy with relatively well defined bill of rights.

Sat, 09/12/2009 - 02:57 | 67403 Hephasteus
Hephasteus's picture

Finally some infrastructure spending in America. We are getting a new Great Wall. Whether we want it or not. :)

Sat, 09/12/2009 - 03:08 | 67411 straightershooter
straightershooter's picture

Great Wall! Brilliant!

Let us build a great wall, longer, higher and wider, overtaking china's great wall. A US great wall that can be seen from Mars!

Let us pass law mandating the great wall of Us must be build only by manual labor. No machine is allowed. and No steel is allowed ( to prevent mexicans from stealing it) Only pebble, dirt and shovel. That shall create 10 million jobs, paying decent federal employee wages with full health  benefit. Problem solved! 

Sat, 09/12/2009 - 03:23 | 67416 Comrade de Chaos
Comrade de Chaos's picture

I get your point but since they don't play by fair rules why should we? Besides, whoever panics first and raises the barriers first will LOSE the least. So it is logical step to move in first with those measures, unless you can trust CHinese promises of devaluating their currency and playing faire without HUGE export subsidies, etc. So can we trust 'em based on the decade old promise of opening up their market and making their currency flexible?

 

The trade imbalances are so huge and crisis impacts are so fundamental and severe that trade wars are simply inevitable.

(Unless you believe humans are rational, it's not wise to act the last and depend on your opponent's good will.)

Sat, 09/12/2009 - 03:48 | 67427 straightershooter
straightershooter's picture

http://www.bloomberg.com/apps/news?pid=20601101&sid=aGp2PvUTM05U

It is ironic that the tires made in China are actually made by US tire corporations using cheap chinese labors. In short, the majority of the profit is earned by US tire companies, not chinese.

It is the steel  union workers in the tire companies who filed the complaint in an attempt to block the outsources of work to outside of the USA. To levy a countervailing tax, one must show the harm done to the industry. In this case, no tire companies ever claim suffering any damange in the first place. heck, they don't even file the complaint.

so, who do you say don't play by the rule?

Brace for impact cause Chinese do not like this, especially after they sent the #2 or #3 leader to the Washington and warn Obama personally.

PS. A significant portion of trade imbalance between China and USA constitutes the profit earned by US corporations doing business in China. While China enjoys trade surplus, but US enjoys non-trade surplus from China, such as services, higher-education ( I guess there could be a quarter million chinese students studying higher degree in USA), etc.

Sat, 09/12/2009 - 04:49 | 67443 Anonymous
Anonymous's picture

Many of those tyre making facilities will have their site leases expire within five years, reverting ownership to China. Also, they are in partnership with local Chinese companies (really, just a bunch of party members) to insure proper technology transfer etc. The party members tend to dictate to the foreigners how the company in China is run.

With regard to your P.S. China holds about 1T in US Gov Bonds (and many more T in private reserves). US companies are running on credit, not cash. The profit you speak of is an accounting technicality.

Sat, 09/12/2009 - 19:59 | 67921 Comrade de Chaos
Comrade de Chaos's picture

A pretty sound classical explanation. And while I have little against classical econ, you ve got to remember that sometimes the classic econ main assumption that all parties during an exchange will behave in a rational manner is inaccurate. I would have nothing against being nice to CHinese and letting them to gain more than we do, if they would not constantly manipulate the whole equation for over a DECADE. However since they do manipulate, the classical model fails and overall result we gain nothing while they gain everything. Yeah, the prices were low for our consumers, so we sacrificed our investment and net benefit of trade with China would be much lower than claimed.  

And the best approach would be the GAME application. In addition many do not realize but we do have an upper hand with Chinese, since being in control of end user marketing provides flexibility and market power. 

 

p.s. Pardon my grammar, I ve got a headache.

Sat, 09/12/2009 - 04:10 | 67434 Hephasteus
Hephasteus's picture

I think we are beyond cooperation-defection game theory. We're going to timeout.

Sat, 09/12/2009 - 11:59 | 67622 Anonymous
Anonymous's picture

You want fair trade? Create a new global currency.
this way no country will be peg it's currency to USD
. USD being reserve currency gives USA unfair advantage.
with global reserve currency every country will
be free from another countries politics.
USD being reserve currency is not fair for rest
of the world.

Through this crisis countries are learning and they
are learning fast. Expect a better future
not just for america but for whole world.

Sat, 09/12/2009 - 12:43 | 67674 Hephasteus
Hephasteus's picture

A global debt based fractional reserve currency? No thanks. A global currency where people can pool their resources and create moderately sized businesses  that don't get out of hand and start having entire countries serve their needs. That I can live with. I will walk to another universe before I spend another lifetime under a FED or an IMF or some stupid rediculous dictatorial system.

Intel has a site up that gives .25 cents for everytime someone goes to it and clicks it and the money goes to starving 3rd world countries. That's 75,000 lousy dollars. That's wine money for half it's top executives and they want 300,000 people to visit a site and click a stupid web page so they can PR over that pathetic crap. This is the kind of world I can strangle. This is the kind of world I don't want to control I want it's disgust. I want it to know no matter how nice it is to me I will make it disgusted. No matter how mean it is to me I will make it more disgusted. No control. No parlez, no if's ands or buts. I'll make freak off fruit all day every day. All life every life till it gags and vomits on it.

Sat, 09/12/2009 - 20:11 | 67927 Comrade de Chaos
Comrade de Chaos's picture

to the ANON above:

Yeah/ I want a fair and free trade. However in order to achieve such sometimes you ve got to stop being nice and tell F. you so you could protect your LONG RUN interests. While our consumers did benefit, the long term manipulation of trade has caused our consumption to shift from its natural equilibrium, hence the long run benefits are rather questionable. They aren't questionable when we talk about trade with Europe, Japan or some other export countries because we all have relatively similar labor and environmental laws. They aren't questionable with some poor countries because difference in labor skills and goods specialization. However long term befits are questionable when a country promises to open its market and does nothing (CHinese open their market only if you shift production / part production to their territory, which we should do the same to take unfair advantage from them; let's say 20% of all components has to be produced in the US within 3 years of acceptance of such a legislation.) They also questionable when a country manipulates its currency and provides huge subsidies to its exporters.

 

Trick me once, shame on you; trick me 15 times shame on.. common people wake up.

Sat, 09/12/2009 - 10:09 | 67546 Anonymous
Anonymous's picture

And the wall will be purchased from WALMART no doubt. So ultimately it will come from China. How ironic!

Sat, 09/12/2009 - 10:16 | 67553 Anonymous
Anonymous's picture

To be purchased from WALMART no doubt. So ultimately it will come from China.

Sat, 09/12/2009 - 03:01 | 67406 Anonymous
Anonymous's picture

It is becoming quite apparent that the USA sees this as an all-in game.
They do have a PLAN.....and so do the holders of USTs.
Really the US has no choice.....go for it all in the next few years or face catastrophe s of unimaginable proportions.
We WILL DEFAULT in many ways!

Sat, 09/12/2009 - 05:26 | 67456 Trading Nymph
Trading Nymph's picture

Actually...here is the real interesting point....GM sells more cars in China than USA. Ford has waiting list in China for the Focus....I have been picking up rumblings that China would just like to rip off model designs and build them themselves under China Auto Makers....NOW this, is Obama just stupid?.....Ok boys and girls....China was already getting ready for this..per China Digital Times last week..."the Chinese government will not turn away from issues that will harm the interests of Chinese industries. Officials from the Bureau of Fair Trade for Imports & Exports with the Ministry of Commerce said China has prepared an assortment of plans for countering different possible results from the Obama administration.

"We will surely protect local tire manufacturers from being hurt when needed," they said.

China will likely take retaliatory measures against the US industries. The Tire Industry Association has petitioned China to launch restrictive measures.

Moreover, experts suggested the Chinese government clamp down on US auto imports. During the first half, China imported more than $1 billion worth of automobiles from the US, up by 9.1 percent year-on-year.

"It's unfair for Chinese laborers, after we made the American automakers happy, if the US launches sanctions against Chinese tire imports," said He Weiwen, a council member of the China Society for American Economy Studies."............Translation, screw you USA we will build our own cars and stick our own tires on them...

Sat, 09/12/2009 - 10:56 | 67578 They steal from...
They steal from us everyday's picture

Excellent points, trading nymph.  The Chinese brand is called Chery.

This cannot and will not end well.

Ofuckingbama did this to benefit a tiny handful of union members.  I think the number was 8,000.

A trade war to benefit 8,000.  With the only actual 'benefit' being that tires will be more expensive to 300 million of us.  Furthermore the Chinese ABSOLUTELY will retaliate to a much bigger degree because that is exactly what they always do.  In other words, this full scale all out trade war has officially begun due to political pandering on Obama's part.  The Chinese have been waiting for this move, as they suggest.  They are ready.

Way to look out for all of us and not just your political interests, Boy Corporate.

 

Sat, 09/12/2009 - 18:31 | 67885 Trading Nymph
Trading Nymph's picture

Thank you "Steal"...Actually the Chinese are SO smart..

USD sold off cuz probably a lot of people think that China will dump our debt to get back at us over Tariff.....but by doing that it hurts China too cuz they have so much of our Debt still. Instead, if they say "we are imposing a Tariff on USA autos".....the Auto Unions become upset with the Tire Unions, the car makers become great shorts and China gets to build up their automakers with copy cat Ford Focuses and knock off Black Buicks......this is such perfection....win/win for China all around if it is played that way.

 

Sat, 09/12/2009 - 21:35 | 67956 Hephasteus
Hephasteus's picture

The chinese have been dumping the dollar as fast as they could for over a year now. They know that there is no way to do it fast enough without collpasing the dollar. So they are simply trying to stay ahead of the monetization game. At some point they won't care and will just dump the last of thier assets. I think that some day is really really close.

Sat, 09/12/2009 - 06:13 | 67464 Anonymous
Anonymous's picture

Who is his right mind would anger the Chinese when they hold 2 Trillion of you're debt !!!???

Sat, 09/12/2009 - 06:45 | 67468 bonddude
bonddude's picture

Matching protectionism up with a unstoppable crashing dollar does what?

sounds bad...like the 30s? What's next, FDR emptying your gold in your safety box?

Sat, 09/12/2009 - 07:29 | 67477 Marge N Call
Marge N Call's picture

Not if my Remington, Smith & Wesson, or Bushmaster have anything to say about it.

Sat, 09/12/2009 - 09:17 | 67522 MinnesotaNice
MinnesotaNice's picture

Yep... its following the same predictable pattern...

Sat, 09/12/2009 - 12:38 | 67646 Yu8t (not verified)
Sat, 09/12/2009 - 12:49 | 67678 Hephasteus
Hephasteus's picture

Oh ya. You don't like the dollar. Well we'll stop buying things you make with it. I don't see how this deserves any kind of understanding. Everyone is getting what they want. Why should people even be pretending to be upset over it.

Oh ya. Cause it means something else.

Sat, 09/12/2009 - 07:43 | 67479 Pelosis Usless Brain
Pelosis Usless Brain's picture

This is like slapping your girlfriend, calling her a bitch and then asking her for sex.

Sat, 09/12/2009 - 08:42 | 67504 Hansel
Hansel's picture

Usually works for me.

Sat, 09/12/2009 - 10:54 | 67577 Mr. Anonymous
Mr. Anonymous's picture

Donkey punch?

Sat, 09/12/2009 - 12:50 | 67680 Hephasteus
Hephasteus's picture

Exactly. Break up if your not happy but don't get into mutually destructive patterns to try to make it work.

Sat, 09/12/2009 - 08:18 | 67491 I need more cowbell
I need more cowbell's picture

OK, so now we know the very specific reason gold ramped hard all week, the boyz in the back room knew this was coming. So, riddle me this. Does this shake our markets, or will the knowledge DXY is going buh-bye elevate it further?

"May you live in interesting times" That used to sound so benign and cute, now I see it for the curse it is.

Sat, 09/12/2009 - 08:21 | 67496 Gargamel
Gargamel's picture

Making the same mistakes of the great depression right on key.  On the bright side this mayaccelerate the currency collapse and get us back on the right track to building a real economy. painful to watch...

Sat, 09/12/2009 - 08:30 | 67497 AN0NYM0US
AN0NYM0US's picture

Protectionism from the administration and the President - but he said he was in favor of open markets ( guess that says it all).

 

On a personsal basis I would prefer not to ride on tires made in China, eat food with ingredients sourced from China (though I do like Chinese Food) nor take pharmaceuticals manufactured in China. Of course all three of the above are just fantasy, so the best  I can do is hope that the dehydrated Strawberries in my Corn Flakes (sourced from China) came from a farm where the fertilizer was not "natural" and the water source upstream from the tire factory.  

 

Sat, 09/12/2009 - 08:34 | 67501 Anonymous
Anonymous's picture

I guess this is the end of "Hurry up and buy, I love you long time."

Sat, 09/12/2009 - 09:13 | 67520 SteveNYC
SteveNYC's picture

I don't see China dumping the dollar at all. Why would they want a more competitive US export market priced in US pesos to go up against?Kind of like biting your nose off to spite your face, they ain't that stupid. Retaliating in kind, yes.

The 30's depression steps are being followed to a tea, by one of the most incompetent presidents and Fed chairman in the history of the country. I think the dollar goes up from here as other countries linked to China (Australia for example) get hammered as the dragon's domestic economy comes apart. China is operating purely on government life support at the moment.

Should be interesting, one way or another.

Sat, 09/12/2009 - 11:11 | 67584 They steal from...
They steal from us everyday's picture

With all due respect Steve the facts have suggested otherwise for a long time now.

China fully intends to back out of the dollar.  They have been working on their alternative strategies around the clock for months, if not longer.

In addition to outright stopping treasury purchases, they have branched into so many alternative areas of investment it would be impossible for me to list them all.

They are actively engaged in all kinds of new currency swaps with all their non-US trading partners.

They are hoarding gold, silver and many many precious metals that are vital to the hybrid car industry and solar panels and batteries in general.

They have gone from one end of the earth to the other and basically bought rights to all the available oil and natural gas deposits that could be bought.  So they have the metals essential to build hybrids AND all the remaining oil reserves that could be bought.

They are openly pushing for a new world currency and putting their money into it already.

The thing about Obama's political pandering is that it has given China the excuse they need to go into full scale protectionism and they know damn well that the idiots in charge of our country will simply fight back.

The writing has been on the wall for a long time about all this and only an incompetent administration or an administration with dishonest ulterior motives would start a trade war to benefit a few union members.

Sat, 09/12/2009 - 13:00 | 67682 Sancho Panza
Sancho Panza's picture

They Steal...,

Thanks for this post.  I've been noticing this pattern too but its nice you've kept tabs.  Much more important to look at what someone does, not necessarily what they say.

What's your assessment for how the trade imbalance might correct going forward?  Just brainstorming here.  I see at least two options: (1) dollar collapse, or (2) trade war.  Is there a 3rd or 4th option?  Of the first two, is it possible that a trade war could actually be in the better interests of both the U.S. and China?

 

Sun, 09/13/2009 - 02:44 | 68052 Trading Nymph
Trading Nymph's picture

So much of that stupid Shanghai Copper Rally this year was a way to move assets out of USD and into hard commodity, they now just have too much of the stuff. BTW did anyone notice that Copper didn't joint the rally in Gold and Silver...when it tops all the people watching Dr. Copper will say Green Shoots are gone again I bet.

Sat, 09/12/2009 - 11:45 | 67616 Anonymous
Anonymous's picture

You ought to do some traveling...

Sat, 09/12/2009 - 09:27 | 67529 max2205
max2205's picture

When will the 20 mill unemployed savings (if any) run out? Where will they sleep and eat, at the empty strip malls?

Wait for it...... Trickle up velocity is X100 more than trickle down.

Shit will hit the fan. Don't look for it on the MSM though.

Sat, 09/12/2009 - 09:32 | 67531 Anonymous
Anonymous's picture

Why don't the unions start a marketing campaign to encourage consumers to buy safer US made tires. According to independent tires distributors the Chinese tires are crap and represent a safety hazard. The unions should target the retailers who import these tires and forced them to sell better quality products.

Sat, 09/12/2009 - 09:40 | 67533 Anonymous
Anonymous's picture

Yeah this is certain to help fix the economy: take away the market-consensus best/cheapest tires so that we have to pay more for the same amount of capital, and piss off an important international entity in the process. Oh, grand delusions!

Sat, 09/12/2009 - 10:00 | 67542 Anonymous
Anonymous's picture

I don't think this has anything to do with healthcare and the unions- it is bigger than that.

Obama has just shown he has some nads on trade. He just threw a monkey wrench into the wealth exporting machine.

Sat, 09/12/2009 - 14:10 | 67741 KevinB
KevinB's picture

Some nads?! This is just like the softwood dispute - America makes the rules and obeys as long it works America. Then, when it turns out that someone else (Canada) can produce the wood more cheaply and starts taking market share, America suddenly wants to change the rules and hide behind tariffs and quotas. This strategy worked well when America was king of the world. Today - not so much.

Sat, 09/12/2009 - 10:01 | 67543 novanglus
novanglus's picture

"In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics."

Sat, 09/12/2009 - 10:09 | 67547 MinnesotaNice
MinnesotaNice's picture

That was great...

Sat, 09/12/2009 - 17:49 | 67867 Careless Whisper
Careless Whisper's picture

RFLMAO. Thanks novanglus, I forgot all about that. I guess it was Bama's day off too.

http://www.youtube.com/watch?v=lWzMyKSIbFY

 

Sat, 09/12/2009 - 10:23 | 67556 AN0NYM0US
AN0NYM0US's picture

+1

 

http://newsfrom1930.blogspot.com/

 

"Many political and business leaders said to agree an advancing stock market might help business by improving confidence and forward buying.

Brokers, businessmen, and even the general public more optimistic; over 75% of brokerage houses now advise buying stocks."

Sat, 09/12/2009 - 21:44 | 67961 glenlloyd
glenlloyd's picture

it's become abundantly clear that we don't learn from our past mistakes. what was it...a person who is insane does the same thing over and over again expecting a different result? HAHA

Sat, 09/12/2009 - 21:58 | 67965 Anonymous
Anonymous's picture

I'm curious to see if the outcome will be the same this time, considering that (OK, I'm just guessing here, I cbf looking up the numbers, but I'm assuming) the USA in general is more of the consumer than it was in the 30's.

Sat, 09/12/2009 - 10:04 | 67544 Anonymous
Anonymous's picture

Let's see:

Obama wants to raise taxes on the rich and impose tariffs on imported goods

is it me or is he chanelling Herbert Hoover?

Sat, 09/12/2009 - 10:10 | 67549 Anonymous
Anonymous's picture

As I stated at other blog last night...

"Interesting... and they say no protectionism?

http://www.marketwatch.com/story/obama-slaps-tariff-on-chinese-tires-200...

I wonder what China will do next? Not buy treasury? :)"

"Yup, first you start with tire... then what next? The entire car? So no japanese car anymore? 100% tariff on all Japanese and European car, so to protect GM/Chrysler? And then what next? Tariff on all Korean made electronics? Wow, soon we America is going to start global TRADE WAR!"

Sat, 09/12/2009 - 10:16 | 67554 Anonymous
Anonymous's picture

The tire issue is just an announcement by the US that it has come to the realization that you cant create jobs when you lack any competitive advantage that Keynes referenced in either land, labor or capital.

The issue that the administration is dealing with is the pressure from Union supporters to insure uneconomic competitive jobs on a global basis. The world knows from its 1930 adventures that what is now happening was expected to happen in terms of protectionism. This protectionism will grow around the world as every Country seeks to maintain their greatest percentage of capacity utilization in an environment where capacity or infrastrcuture is a defalationary liability on the part of the holder of the excess capacity.

It wasnt until the 1940s that the world destroyed enough excess capacity so as to begin to grow again. If one thinks about it the western world built tremendous capacity. Then with the development of inexpensive shipment capacity the world rebuilt this capacity in Asia leaving much unused capacity in the West along with the demise of the financial capacity to purchase longer term the less costly goods made in Asia.

Therefore, the US consumer lead 70% of GDP will fall to closer to 50% of a new normal over all GDP probably bringing what was a 70% factor to atleast the equivelent of a 50% predecline GDP or a reductionof 20% of gross GDP or 14% of what was the predecline nominal GDP.

Regardless, the world will have to learn to live with much lower expectations and there will be some significant apin in this decline that CNBC will not be able to spin.

We will see.

Sat, 09/12/2009 - 10:20 | 67557 spanish inquisition
spanish inquisition's picture

Interesting to look at this from a few angles to see the balancing act.

You need the economy to be more active, you need to promote inflationary policies in the short term and you do not want to hurt corporate profits. You may be able to accomplish this with a tariff, if it is set fairly low.

The only way for many US companies to be competitive is to lower wages, which perpetuates the deflationary spiral. Workers with lower wages spend less and default more.

You don't want to piss off the Chinese, so you call them in and ask them to be pissed off and negotiate a non quid pro quo that will be revealed in a few days. Maybe you sell them a couple of hundred tons of gold out of the vault and off the books so it doesn't affect the market. You also set a temporary guideline when it will be removed with certain metrics being hit.

I think I am getting the hang of thinking like a politician. I have to go take a shower now.

Sat, 09/12/2009 - 10:51 | 67575 Anonymous
Anonymous's picture

Shower, lol. We can respond to a trade war, which I doubt. Nothing we can't make here, and if we are as productive as wall street says, it's ok, right? Plenty of capacity. Disruptive, yes.

Sat, 09/12/2009 - 10:30 | 67564 Sancho Panza
Sancho Panza's picture

This is an interesting development.  Is the official Chinese stance on this sincere, or are they ok with the tariff behind closed doors?  Consider:

Behind closed doors, the Chinese could simply see a gradual imposition of tariffs as an experiment for slowly weaning the U.S. off its trade deficit without tanking the dollar.  Is this issue simply a trial run for a larger smoke and mirrors show that could allow the Chinese to quietly run for the exits before other countries try to get rid of their dollars?

Or, if the Chinese disgust with the tariff is sincere, what does that say about their stance for how they want this international economic crisis to unfold?  Does this mean the Chinese see more value in a U.S. dollar than they do in tires?  But how would the Chinese ever expect to be paid back in strong dollars when a strong dollar would necessarily prevent the trade balance from correcting?

I find the latter scenario less believable.  Should we nominate the Chinese for an Oscar? 

Sat, 09/12/2009 - 10:51 | 67576 SilverIsKing
SilverIsKing's picture

This smells.

First it's released on a Friday night, a la the bank failures.

Second, the release has Obama's name on this front and center.  Could have been done using "White House" rather than "Obama".

Also, doesn't Congress have a say in these things?

I believe most things happen for a reason.  Not exactly sure what they might be though.

Sat, 09/12/2009 - 13:18 | 67706 MountainHawk
MountainHawk's picture

I agree, smells really fishy... Something someone hasn't mentioned yet, could this be a temporary tarrif to get the health care bill passed w/ the support of the union, then later eliminated in the name of open/free trade?

Sat, 09/12/2009 - 11:15 | 67590 They steal from...
They steal from us everyday's picture

Sancho,

The Chinese want this badly.  Good points you bring up.

They seriously would show no interest in protecting their tire makers if it did not suit their interests.  The Chinese always pick their battles.

Sat, 09/12/2009 - 13:15 | 67700 Hephasteus
Hephasteus's picture

Any logical thinking economist would close debt windows. But yet debt windows remain open and carry trades run rampant all over the globe. Any logical thinking economist would close trade windows. Yet trade imbalances run rampant all over the globe. What are they serving except confusion and underlying lies and manipulations. This will end up being global pretend indebtedness. The chinese will rule us becuase we owe them. The US will rule south america because they owe us. Japan will rule blah blah blah ad infinitum. It's game of global thermonuclear governmental pimping and whoring.

Sat, 09/12/2009 - 10:56 | 67579 Anonymous
Anonymous's picture

a good piece in the WSJ that suggests the approach that the specific Obama has taken in this will become a president for other industries.

A Protectionist Wave
Obama invites a rush of similar claims with his tariffs on Chinese tires.

http://online.wsj.com/article/SB1000142405297020344010457440416356247208...

Sat, 09/12/2009 - 11:05 | 67581 Anonymous
Anonymous's picture

If I am not mistaken, the Chinese could dump their entire UST holding for $0.01 with a lower net cost than our adventures in Iraq and Afghanstan. Without shedding a drop of Chinese blood, they could us to our knees.

The recent moves to establish the yuan as an international currency and the fairly obvious attempt to corner the gold market (their own increased holdings and demand for delivery coupled with their starting to encourage gold and silver purchases by their citizens) could be preparation for the day when their spring their trap. Doubling the value of their gold reserves would offset a lot of loss from the collapse of the dollar.

The Japanese appear to be putting a bit of distance between themselves and the US. Could they see the same picture?

I fear this is the essence of the Chinese strategy. Their tactical plan would be to minimize their losses along the way.

Sat, 09/12/2009 - 13:21 | 67711 MountainHawk
MountainHawk's picture

" Doubling the value of their gold reserves would offset a lot of loss from the collapse of the dollar." Precisely what we could be seeing in the next couple of years.

 

 

 

Sat, 09/12/2009 - 11:14 | 67589 AN0NYM0US
AN0NYM0US's picture

 

Engaging the Chinese with this sort of brinkmanship must have a serious back-story. 

This is more than simply catering to some special interests.  Summers and friends understand the evils of  protectionism. And no, congress does not have a say on the way this tariff is being implemented. I had thought that perhaps this was a chip being played in the health care debate but the implications are too far reaching. Even as a bargaining chip with regard to the meetings in Pittsburgh and Copenhagen that are coming up or another Friday night announcement of direct dialogue with  N Korea; none of these would warrant such an action. 

 

There has to be something very significant underway on the economic front for such a move to have been taken.  Any guesses?

 

Sat, 09/12/2009 - 11:18 | 67592 They steal from...
They steal from us everyday's picture

Another good point.

Obama wants this too.  This is his pro-union trade war and damn the consequences.

Who cares as long as it helps him politically right?

Sat, 09/12/2009 - 11:29 | 67597 AN0NYM0US
AN0NYM0US's picture

stealfrom

I read your post a few above - I would appreciate if you could please elaborate on the statement : (thanks)

"given China the excuse they need to go into full scale protectionism"

Sat, 09/12/2009 - 13:31 | 67719 zeropointfield (not verified)
zeropointfield's picture

I am just wondering whether a centrally managed control economy with a managed currency is not already 'protectionist' enough. They are heavily subsidizing their home players, that's as protectionist as it gets.

Sat, 09/12/2009 - 11:31 | 67599 Anonymous
Anonymous's picture

IMO China is just a few steps away from total collapse. When you mix central planning with free market you end up with a Molotov cocktail. (as BB will also find out) They will be looking for someone to blame.
P.S. Back in the old country even the bad weather was blamed on the USA.

Sat, 09/12/2009 - 11:35 | 67604 msorense
msorense's picture

Don't forget that Bush imposed tariffs on Chinese paper:

http://www.thefabricator-digital.com/thefabricator/200706/?pg=98

It was mainly to benefit a NewPage Paper - a company that Cerberus Capital had recently purchased.  Crony capitalism at its best!

Sat, 09/12/2009 - 12:39 | 67645 Yu8t (not verified)
Yu8t's picture

Meanwhile, four U.S. tire plants closed in 2006 and 2007. Three more are planned for closure this year. There were 5,168 fewer workers in the U.S. tire industry in 2008 than there were in 2004.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Sat, 09/12/2009 - 11:41 | 67607 Basque
Basque's picture
The U.S. administration attempts to recover of the crisis spending. The administration hopes that someone out there to finance not only the recovery of the US economy but also the socialist dreams (nightmares) of their president.

If the external financing of the American economy was made up of dollars, it would not require a lender out there, the U.S. government has a big dollar printing press.

The problem is that external financing of the american economy is not made of dollars but this financing is made of, in fact, chinese tires.

The chinese sent to the United States a ship loaded with tires, this ship back to Asia empty (except for a handful of papers). This (real) event is the act of (real) financing of the (real) american economy. Free tires. Take your free tire, pay it in 10 years.

The dollars that the chinese get for these tires and the reprocesing of those dollars into bonds is just a game of paper with no real economic significance. These paper games are just a sham role of financing not a real financing process. The external financing consists of a loan made by tires. Dollars and bonds are only evidence of that credit, documents attesting to this tire loan. Without tires no funding, only an exchange of papers.

Sat, 09/12/2009 - 12:57 | 67688 Hephasteus
Hephasteus's picture

Actually not quite true. In california there is a few housing editions that get extra darkness for about 3 hours every day because there are EMPTY shipping containers stacked so HIGH the sun doesn't eclipse them till like 11 am. These will be competitive housing for the real estate industry over the next few years as people tire of all the tent cities and finally truck those out to parks everywhere.

Sat, 09/12/2009 - 13:18 | 67705 Basque
Basque's picture
True, the US trade deficit is collapsing but the trade deficit is just the only real measure of the external financing of the real economy. If protectionist measures further sabotage that trade deficit the administration will be sabotaging the real external financing.

The issuance and sale to foreigns of tons of debt instruments not change this fact.

Sat, 09/12/2009 - 12:02 | 67625 Anonymous
Anonymous's picture

The US is not blaming this crisis on the people who caused it at home, so it needs a foreign scapegoat. China fills the bill. Russia won't be far behind. Neocons still rule.

Sat, 09/12/2009 - 12:08 | 67629 deadhead
deadhead's picture

A couple of points to add here based on what I have been reading on this matter.

the micro issues are essentially:

1. There can be very little question that Obama did this to placate the labor union support team.  the actual number of union workers affected by this is rather small.  any way you shake it, the net result is Obama payback to labor for getting him elected. yeah, they didn't card check (yet, at least) but Obama at least threw them a bone.

2. the tire imports in question are essentially those for small, compact cars.  as I understand it, the american mfrs. of tires were abandoning this niche anyways and didn't give a rats ass about the small tires, because margins sucked.  once american mfrs. started abandoning this a couple of yrs ago, the chinese swooped in. 

The macro picture is certainly the bigger story here including the already noted concepts of protectionism, trade wars, pissing off our honey money chinese overlords, pulling a public "phuck you" before the G 20 on USA geographical turf, impact on the dollar, impact on treasuries, and a number of other matters as well that either I am unaware of or didn't mention cuz I need another pot of coffee.

Whatever the case, this is an important story and thank to ZH and Travis for putting it up.  Kudos to Travis for a very nicely written piece.  Seems to me this is a fairly important move in an ongoing and what will likely be an escalating chess game.

While I'm at it, I would like to say that I am thankful to the zh community for sharing its thoughts, comments, opinions, rants, et.al. on a continuing basis as this forum is a magnificent and valuable resource for continuing education and learning new ideas.

 

Sat, 09/12/2009 - 18:17 | 67878 MinnesotaNice
MinnesotaNice's picture

If this is the bone that the unions get for abandoning card check... then I am all for it...

Sat, 09/12/2009 - 18:52 | 67643 Yu8t (not verified)
Yu8t's picture

FED will give up and let the credit supply to go back to equilibrium. GOV will gently break down financial institutions into the smaller compartments, and over saving rate will remain positive.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Sat, 09/12/2009 - 12:24 | 67652 Careless Whisper
Careless Whisper's picture

I think Rahmbo needed a few more votes on health care so, viola, tire tariffs.

More import though, is that China isn't going to take any more crap from Wall Street on those bullshit derivatives, (mostly oil). Apparently the Chinese gov thinks the contracts were "fraudulent", in the contractual sense and has given the green light to its banks to not honor them. Apparently China thinks the oil market has been manipulated. Hmmm...

So bankstas, listen up, don't fuck with China.

http://online.wsj.com/article/SB125252560206996817.html

 

Sat, 09/12/2009 - 12:42 | 67671 Crab Cake
Crab Cake's picture

I was thinking the same.  In fact it is rumored that China has done more that threaten to nullify these derivative contracts.  They may have already done so and it's being kept on the down low.  Thanks for the link.

Sat, 09/12/2009 - 13:22 | 67712 AN0NYM0US
AN0NYM0US's picture

 but this tire issue has been out there since early this year* - agreed it's convenient for the administration to repay its union supporters but they would not risk a trade war IMO - something else (much bigger) at work here I suspect

 

 

http://www.theage.com.au/business/world-business/us-steelworkers-file-tr...

Sat, 09/12/2009 - 12:25 | 67653 Printfaster
Printfaster's picture

I have long maintained without a gold standard in currencies, the US needs to establish an across the board tariff that tries to steer the balance of trade to zero.

Tariffs should be across the board, or else we have China and Japan supplying new Guccis for every shill on K Street.

 

Sat, 09/12/2009 - 12:37 | 67665 Crab Cake
Crab Cake's picture

I'm surprised there is no mention of China bailing on derivative contracts in this article?  Does anyone have any news on this?

Sat, 09/12/2009 - 13:04 | 67694 Careless Whisper
Careless Whisper's picture

Here's a few more links. Goldman and others are trying to spin this as "China should honor its contracts" or "China renegs..." but the reality, as you know, is that China feels they weren't told everything when they were sold the derivatives and basically they're not going to fuck around with lawsuits, arbitration, and all that crap. They don't have to.

http://www.forbes.com/feeds/reuters/2009/09/01/2009-09-01T102249Z_01_SP508234_RTRIDST_0_CHINA-DERIVATIVES-ANALYSIS.html

http://dealbook.blogs.nytimes.com/2009/08/31/china-derivatives-losses-trouble-ties-with-banks/

http://www.youtube.com/watch?v=2tWfU0Wb5Fw

 

 

Sat, 09/12/2009 - 12:52 | 67683 Anonymous
Anonymous's picture

Excuse me but we hold 2.1 Trillion of your toilet paper.

Letter to Obama by the Chinese Rubber Industry Association

http://www.cria.org.cn/criawebsite/english/aboutus.htm

Sat, 09/12/2009 - 13:11 | 67697 Anonymous
Anonymous's picture

China originally created a market with North American consumer that didn't really exist previously. They made low value, low priced gagets that we used to rent from the rental outlets. It made many things affordable to the average consumer that were beyond reach if domestically made.
The low quality was a result of low levels of expertise & technology.
I don't really think the arrogant American capitalist envisioned the chinese of becoming the threat to the quality of home built products they have become. Granted the quality still isn't there in most cases but its rapidly coming. They bigger problem is the cost factor has remained extremely low which is slaughtering the american manufacturerer.
The saddest result is the revaluation of US products. The product quality has had to go down to compete with chinese goods even though US the wage structure has flat to higher. It was either cheapen or perish which may US companies have. Further the american manufacturer has been forced to compress the wholesale retail price structure that allows very little profit margin on home built product.
What has arisen is a predatory retail sector that is literally buying Chinese import good at 10% or less to the US dollar but only marking it down by 15 to 20% or so to the US made goods. That local product is only hung beside the import product in order to make the import product seem more appealing.
Protectionism is only the result of trade policies & decisions previously enacted that were so short sighted tio begin with.

Sat, 09/12/2009 - 15:37 | 67811 KevinB
KevinB's picture

For most of the last 60 years, the US and my Canada have grown fat and sassy because of a number of things. First, the productive capacity of Europe and Japan was seriously damaged by the war. The number of young men that died left them with a shortage of new workers to repair the damage. North America emerged unscathed, with relatively few dead and all our productive capacity intact.

Second, we also had enormous advantages in raw materials, space, power, etc. This allowed us to build the world's best industries through the 50's and early 60's.

Third, we were separated from both Europe and Japan by immense oceans which isolated our industries from a great deal of competitive products.

Fourth, slow and uncertain communication links made outsourcing impossibly difficult to achieve on any large scale. All these factors created huge non-tariff barriers for North America, behind which our unions and our executives both grew fat and sassy together.

However, with the advent of container ships, greatly improved communications, the inevitable recovery of Japan and Europe, these barriers began to erode. Now, they no longer exist.

Anyone who's studied chemistry knows that when you have a semi-permeable membrane between two solutions, they will mix slowly. Remove that membrane, and the mixing occurs very quickly. This is what is happening to us now - all the barriers that allowed us to retain a high standard of living while most of the world lived in poverty have virtually disappeared. The economic "solutions" are mixing, and the result is leveling of living standards between the G8 and the BRIC nations will continue. Tariff barriers are nothing more than a stop-gap measure, trying to prevent the inevitable. It ain't gonna happen.  

Sat, 09/12/2009 - 16:13 | 67824 capitalisa
capitalisa's picture

allowed us to retain a high standard of living while most of the world lived in poverty There's a good reason Americans have a better standard of living.  It's called a republic and freedom.  Why do so many people want Americans to suffer?  Why do they hate the good, for being good?  Hurting us does not make a dictatorship more healthy.  HISTORY books people, you all need some damn HISTORY.  A rational philosophy would also go a long way to healing your brains. 

Sat, 09/12/2009 - 18:53 | 67898 Yu8t (not verified)
Yu8t's picture

They do have a PLAN.....and so do the holders of USTs.
Really the US has no choice.....go for it all in the next few years or face catastrophe s of unimaginable proportions.

Sat, 09/12/2009 - 13:19 | 67707 Anonymous
Anonymous's picture

According to my local tire shop (I bought Dunlop last year when I specified I wanted American-made):

Manufacturers, or brand names:

Chinese tires (few):
Nexen

Japanese (many):
Bridgestone
Sumotomo
Firestone

U.S.A. (only manufacturer left):
Goodyear (Dunlop included in Goodyear)

Sat, 09/12/2009 - 13:54 | 67731 waterdog
waterdog's picture

China did not believe the part in the rules manual that detailed what could happen if we asked them to do something for us and they decided not to do it. The Treasury Secretary speaks fluent Chinese. I am sure he explained it to them in June 2009. Since the Chinese set their currency valuation so it does not fluctuate(against our wishes), we have decided to take the dollar very very low against that inflexible rate. They are about to understand that part of the rule book a little better. The tire issue is just a warning shot. China's central bank is only communist. Our central bank is borderline criminal, but free. That is not in the rule book, it is a part of life in the free world. All the Chinise can do is export products to us that are poisonous.

Sat, 09/12/2009 - 18:19 | 67880 MinnesotaNice
MinnesotaNice's picture

I agree waterdog... now can I get a copy of that rules manual :-)

Sat, 09/12/2009 - 14:24 | 67756 Cocktosen
Cocktosen's picture

I'm buying gold on Monday.  Buh-bye dollar.  This is just the beginning.

Sat, 09/12/2009 - 14:38 | 67766 Anonymous
Anonymous's picture

I'm surprised there's no mention in the article of Geithner officially saying to Chinese to forget about US consumers,
no mention about Chinese decreasing their UST holdings by $25 billion in one month,
and there's no mention about Chinese suddenly suggesting their people to invest in Gold/Silver.

I'm surprised that all 40+ TD's cannot connect the dots here.

Sat, 09/12/2009 - 16:17 | 67829 deadhead
deadhead's picture

I believe all 3 of the topics referenced in your first paragraph have been covered by ZH and its contributors/commenters.

Let's keep in mind it is one article about a specific subject that is part of a bigger matter, just as you have suggested.  But, it is an article, not an attempt at a novel.

please also note that you are welcome to submit an article such as the one you seem to be suggesting as a contributor to ZH and you can connect the dots.

Sat, 09/12/2009 - 17:04 | 67846 HankPaulson
HankPaulson's picture

That's how I see it too.

 

Also, in general, ZH does a brilliant job of providing and connecting the dots, gotta be said.

Sat, 09/12/2009 - 14:51 | 67770 Anonymous
Anonymous's picture

It's war, and it's on like Donkey Con.

Sat, 09/12/2009 - 16:08 | 67822 capitalisa
capitalisa's picture

Geez, some people never learn.  Obama, et al, are just repeating history.  Smoot-Hawley, anyone??  Yea, this is all going to turn out great...time for Americans to take back their government before these idiots kill us all.

Sat, 09/12/2009 - 17:06 | 67848 Anonymous
Anonymous's picture

http://3.bp.blogspot.com/_vQft8rEk-Lo/Sqv9O976esI/AAAAAAAAAVw/TeftdvSu12...

It's amazing that treasury bonds have held up as well as they have this year. Will China make that part of their retaliation? Who knows but that sure would be interesting.

Sat, 09/12/2009 - 17:42 | 67863 Anonymous
Anonymous's picture

China started the trade war with not honoring derivatives/ contract, starting its own exchange for gold. I wonder how much US and other banks are on the hook for these derivatives. Which bank is hurt more? Any guesses?

Sun, 09/13/2009 - 00:46 | 68030 Careless Whisper
Careless Whisper's picture

What if the bankstas mislead China as to what was in the derivatives? What if the bankstas are manipulating the oil market, thus effecting the derivatives? What if China learned a lesson by watching (last year) the pension funds, municipalities, and citizens in the U.S. take a hit from the bankstas' derivatives, and have no recourse (you think the SEC gonna help China) ?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aia5rMTvR2V0

 

Sat, 09/12/2009 - 18:00 | 67873 Anonymous
Anonymous's picture

On Free-Trade:

California is a HUGE producer of rice. In the 1980s the US Government was pressuring Japan to allow importation and sale of US [California, really]rice.

Japan's Trade Minister publicly agreed that [1] US bulk rice quality was higher than Japan's and [2] Imported US rice prices would be lower than Japan's domestic prices and [3]Japan does subsidize its domestic rice farmers...

Then he explained that Japan subsidized its small rice farmers and kept the prices "artificially" high to support domestic production precisely because rice is staple of the Japanese diet.

To paraphrase, "If we allow import of higher quality rice at lower prices, our farmers could not compete. Thus our imported food-supply could be cut-off by an exporter at any time. Do you expect us to put our food supply at risk?

Sat, 09/12/2009 - 18:51 | 67897 Yu8t (not verified)
Yu8t's picture

The sick thing is that we want free trade when it
benefits us and no when it does not...and the PTB
go on and advise other countries to bring down trade
barriers.

Sat, 09/12/2009 - 20:44 | 67934 Bearish Spirits
Bearish Spirits's picture

Within two days, the U.S. places tariffs on both Chinese steel pipe and Chinese tires.

At the same time, the U.S. declares it is ready to have bilateral talks with China's puppet, North Korea.

--The U.S. concedes on a major diplomatic point in exchange for economic concessions from the Chinese.  The Chinese complain to the media to save face.  Obama gets to act like an economic tough guy while giving in to North Korea.

Nothing is a coincidence.

Sat, 09/12/2009 - 21:04 | 67944 AN0NYM0US
AN0NYM0US's picture

you left out that on Monday Mr. President will be making a "major" economic speech which completes your very plausible theory.

 

http://www.huffingtonpost.com/2009/09/10/obama-to-give-financial-c_n_283...

 

 

 

Sat, 09/12/2009 - 20:44 | 67935 straightershooter
Sat, 09/12/2009 - 21:22 | 67953 Anonymous
Anonymous's picture

U.S. also will be conducting direct talks with N. Korea. News drops same day. Wonder how the Chinese feel about that?

Sat, 09/12/2009 - 22:17 | 67977 straightershooter
straightershooter's picture

Happy. Very happy.

China has been demanding that US direct talk to N.Korea.

http://www.voanews.com/english/archive/2003-02/a-2003-02-11-40-China.cfm?moddate=2003-02-11

It is US who refused to do direct talk under the premise that US will not talk to terrorist group.

 

Sat, 09/12/2009 - 22:27 | 67979 straightershooter
straightershooter's picture

Direct talk to N. Korea constitutes the defeat of US foreign policy and acknowledges that US no longer holds the super power status.

A weak, poor N. Korea now can force US to sit down and talk in equal position which  represents the repudiation of  long foreign policy that US will not talk to terrorist group or axis of evil.

Soon US will conduct direct talk to another member of axis of evil: Iran.

A truly sad day for US.

Sat, 09/12/2009 - 23:02 | 67994 Anonymous
Anonymous's picture

Once again...Obama Economy = Massive Cesspool of Unintended Consequences.

Sun, 09/13/2009 - 09:09 | 68093 blindfaith
blindfaith's picture

It would seem that none of you have ever had business dealings with the Chinese.  I have...for 15 years.  They have no respect for weakness, none.  If you can not stand up straight and uphold your position, you will NEVER have a second chance.  WE ARE NOW MARRIED to each other, like it or not, and like all marriges there are squabbles.  There is far to much reactionary wordage floating around these days...and alot of it is disinformation, speculation, and opinion trying to pretend it is fact.  You don't see the Chinese flying off the handle the way Americans do...patience and maturity are no longer taught in America, only mob rule and that kind of childish behavior leads to inflamed feelings, separation, divorce.  If you want to give the Chinese everything, they will kindly take it.  But they DO understand what business is and a one way street has a deadend.  Chillout, they make everything else, they could careless about tires.

Sun, 09/13/2009 - 09:54 | 68105 MinnesotaNice
MinnesotaNice's picture

Very interesting perspective... thanks for sharing that... is the 'weakness' that would diminish respect in China's eyes confined to the government or does it extend to the populous that stands behind the government?

Sun, 09/13/2009 - 11:24 | 68131 deadhead
deadhead's picture

minn....good question.  here's a take....the populous (a minority in terms of numbers, naturally) that has benefited from the economic upswing, now that they know how good it feels to have money and an increased standard of living, certainly does not want that newly found paradigm phucked with.  if the central gov't pushes it too far with the usa, they will feel threatened as the usa is still their main customer base and honey pot.  it's likely that they understand it will take some time to convert their internal culture (the masses) to one of domestic consumer spending ala the western style.

as for the masses who have nothing, history tells us that they will become increasingly pissed as they realize that they are the "have nots" and this will cause the chinese central gov't enormous headaches for many years to come.

Sun, 09/13/2009 - 11:15 | 68130 deadhead
deadhead's picture

excellent perspective blindfaith.

as china tries to ascend to even greater heights of power (and they certaintly are trying) this marriage tension will result in ever greater jawboning.  i note the bloomberg article this morning that they have jacked up the war of words further in regards to usa autos and chickens (i have been following the chickens story)....

I think the most significant matter you stated, and I agree with you, is that "we are now married".  I've always thought the "decoupling" group is on the wrong side of the trade.  As I have said previously, the USA is no longer the 800 pound gorilla, but she is still a rather large monkey.

Sun, 09/13/2009 - 11:46 | 68135 Careless Whisper
Careless Whisper's picture

Blindfaith, I would put it this way; the U.S. is fighting in the Boxing Ring and China is fighting in the UFC Octagon.

Sun, 09/13/2009 - 12:56 | 68172 Screwball
Screwball's picture

I worked for a tire company for 10 years.  We couldn't wait to get as much production as possible in China and Mexico, as fast as possible.  Of course the company told us it was because of the potential profits and huge market.  We had 4 plants manufacturing tires in the US, two of which were union.  They closed one union plant and moved the production to another union plant, and some to a non-union plant.  At the same time, they were moving all they could to Mexico and China.

Last year’s State of the Company prospectus, for lack of a better term, was littered with the phrase "LCC" standing for Low Cost Countries, like spots on a leopard.  Those of us who read it, could see where the company was heading.  It was more about cutting costs than the potential market.  We then bought a plant there, which turned out badly.  The company ended up losing their ass, since they screwed us over by making nothing but bad tires, losing equipment, and selling the rejects on e-bay no less.  We dumped them, but ended up costing us millions of dollars on equipment they refused to return.

So we got in bed with another one.  The mayhem continued, as well as the profit losses.  Granted, all this was not all the fault of the Chinese.  We had a hard time with the language barrier, we sent some of the most boneheaded ass kissing incompetent engineers we had (volunteering to go to China was a sure fire promotion.  That is, if they remember they sent you, and allow you to come back) over there to get the plant up and running.

 But the Chinese were not the best of partners either.  They lost tires, tooling, and changed the rules all the time.  It was a mess, and still was as of a year ago when I left.  They are now producing tires, but according to the latest 10q, the company cannot sell tires in China until 2012.  What a deal!  They could make our tires but we couldn’t sell them there for 4 years.

The quality issue is not exclusive to China's made products for this company.  The engineering department was overwhelmed with the extra work to re-engineer tooling for the China and Mexico endeavors.  Different markings required by different locations of manufacturing relating to DOT and other legal designations, plus different tooling requirements related to tire manufacturing.  We do a poor job ourselves, but China and Mexico were worse.  In other words, they didn't care what they put on the side of a tire, or how it was made, just make them as fast as possible, while we were just incompetent and complacent.  In the end, you don’t know what the hell you are buying, and the quality is always in question.  I question the tires made in America, but I wouldn’t trust any that were made in China or Mexico.

Like tire manufacturing being exported, the engineering and IT will be next.  That was being worked on as well.  With the age of internet connections and FTP sites, engineering is much cheaper in India, China, and who knows where else.  I sure loved training people from India to take our jobs, which is sure to happen at some point in the future.  We dodged that bullet once, but I doubt it will happen again.  It’s all about cost, and the labor cost is much cheaper elsewhere, and they will find a way to use it.

I find this amusing, since I worked for a fortune 100 company (a large auto supplier) through the NAFTA deal in the 90s.  The giant sucking sound as Ross Perot said at the time.  Many people I worked with were pissed, and the GM came out and told us all to write our congress critters in favor of NAFTA, which pissed them off even more.  Now I see outrage over protectionism and trade, and people are pissed off again.  Seems there should be a happy medium, too bad the powers to be can’t find it.

Going forward, the American worker is screwd, but the wage destruction will be worse. What a fucked up mess. At least now, all I have to do is figure out how to trade it.

 

Sun, 09/13/2009 - 16:02 | 68242 deadhead
deadhead's picture

thanks for taking the time to write an extensive piece.  I enjoyed your take on matters.

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