Economy

Tyres now, chickens next?

Last week the Obama administration raised import duties to 35% on Chinese tyres. China is threatening to retaliate against American auto products and chicken meat. Is a trade war looming?

Why target tyres?

The Chinese media puts together a pretty convincing rebuttal of Washington’s case. At least 10,000 US jobs will be lost through the ban, says Xinhua, which is more than the 5,000 that Obama hopes to protect. Chinese tyres are also sold to a different consumer market than American ones. Besides, imports are actually down 15% so far this year.

This is all about domestic politics, argues the Global Times. It’s the steelworker unions who pushed hardest for tariffs and many of the US tyre firms are not even supporting the move. Xinhua agrees; the US image as a free trade leader has undoubtedly been tarnished.

China’s tyre production capacity is now more than three times its shipments to its home market, The Wall Street Journal notes, and China’s share of US sales has surged from 4.7% to 16.7% in the last four years.

But generally the US media is critical of the tariffs. AP wonders about the American firms who have shifted production to China to cut costs, and are now facing restrictions.

The Tire Industry Association is fed up too, saying the tariffs will only force manufacturers to shift their overseas production from China. The Washington Post agrees, predicting a boost in imports from countries like Poland and Mexico.

Trade tensions look inevitable?

The Chinese press is notably subdued, in contrast to the savaging that it gave the Australians in the aftermath of the failed Rio-Chinalco tie-up.

Instead, it heads for the moral high ground, noting China’s commitment to the flagging global economy, and warning that protectionism benefits no one.

The China Daily offers some more homespun words on the trade relationship. Like most 30-year marriages “spats become unavoidable”, it advises. But that’s fine as long as the union is a strong one.

Both sides have ruled out a trade war, the Global Times agrees. And they’ll have time to talk through their differences too. Hu Jintao will soon be on his way to Pittsburgh for the G20 meeting.

Actually, Beijing’s reaction so far looks “swift but measured”, acknowledges the Financial Times, and is more of a “tit-for-tat” response than an escalation.

True, says the Wall Street Journal. China seems ready to keep within the framework of international law, which is a sign the disagreement may be containable. A spokesman for China’s Ministry of Commerce described the move as “a practical step to protect one’s own interests.”

The Washington Post still wonders about the wider potential repercussions, reporting on traders’ fears that China could slow down on US government bond purchases as punishment. Climate activists are also fretting that US-China climate talks could be hit too.

What’s next?

Chickens. ChinaStakes.com is predicting a block on US imports and says that the China Animal Husbandry Association has been preparing an anti-dumping case for six months. Apparently, imports from the US are as much as Rmb500 ($73) per tonne cheaper than for domestic birds. American subsidies of soybeans and corn are to blame.

And maybe US auto exports too, which Xinhua now expects to get more scrutiny. 21CN Business Herald says Chrysler and GM should be worried.

China’s tyre production capacity is now more than three times its shipments to its home market, The Wall Street Journal notes, and China’s share of US sales has surged from 4.7% to 16.7% in the last four years.
But generally the US media is critical of the tariffs. AP wonders about the American firms who have shifted production to China to cut costs, and are now facing restrictions.
The Tire Industry Association is fed up too, saying the tariffs will only force manufacturers to shift their overseas production from China. The Washington Post agrees, predicting a boost in imports from countries like Poland and Mexico.
Actually, Beijing’s reaction so far looks “swift but measured”, acknowledges the Financial Times, and is more of a “tit-for-tat” response than an escalation.
True, says the Wall Street Journal. China seems ready to keep within the framework of international law, which is a sign the disagreement may be containable. A spokesman for China’s Ministry of Commerce described the move as “a practical step to protect one’s own interests.”
The Washington Post still wonders about the wider potential repercussions, reporting on traders’ fears that China could slow down on US government bond purchases as punishment. Climate activists are also fretting that US-China climate talks could be hit too.
The Wall Street Journal downplays the impact of the dispute for the Chinese. Tariffs could cost $1 billion a year in exports, but this is less than 0.3% of China’s $338 billion in exports to the US last year. Admittedly, America’s chicken farmers might be a bit more concerned as sales to China represent a fifth of their exports.
Washington knows it needs to be careful, says Reuters, as it wants to export its way out of recession. n

The Wall Street Journal downplays the impact of the dispute for the Chinese. Tariffs could cost $1 billion a year in exports, but this is less than 0.3% of China’s $338 billion in exports to the US last year. Admittedly, America’s chicken farmers might be a bit more concerned as sales to China represent a fifth of their exports.

Washington knows it needs to be careful, says Reuters, as it wants to export its way out of recession.


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