Not a good time to be in a trade war with China
The recent tariffs on certain items being imported from China has raised quite a few red flags and left a lot of people on edge. There are some out there that say it is something that needs to be done to keep American money in America.
Sure, it sounds like protectionism, but only because that’s what it is.
The White House may be quick to tell us that this whopping 35% tax on tires and chicken meat was not done to protect American interests, but there aren’t many out there who are really buying it.
But it doesn’t really matter who’s trying to protect anybody else. What matters is whether the action is worth the cost. So let’s take a look at what we’re getting and what we’re paying here.
Part of the reason Obama put this all into action is because of a deal he made with trade unions to be more strict on trade laws, especially those concerning China. In return, they would offer him some support in his push for health care reform, something he is happy to grab where he can.
That about does it for any easily seen benefits. Too bad the list of costs isn’t nearly so short. Let’s begin with the obvious effects.
China is now somewhat unhappy with us, and is likely to impose a few tariffs of their own. That money we were hoping to save will be tossed back in our face when we can’t sell as much as we were hoping in the east asian market.
But there are much more subtle forces at work than strict capitalism. Keeping in the same realm, however, there are a lot of businesses, including the tire companies, which have heavy investments in China. A good number of them even have their factories there. With poor American sentiment sweeping the populace, things will be rather difficult for them in the near future.
Most importantly, though, good relations in general with a country that holds a permanent spot on the U.N.’s security council is a good thing to have. And right now, they are especially important with big issues like the global economic recovery or putting sanctions on Iran’s nuclear program. Making a financial enemy out of them now makes their support on these things sketchier than most would feel comfortable with.
As it stands, both countries are in a stare down and trying to live up to the pressure from the populace to be tough on the other. It’s no wonder that an unnamed white house official said that, “few decisions by President Obama have appeared more uncomfortable.”
Uncomfortable wasn’t the first word that came to my mind. Things almost seem ready to get hostile.
The fact of the matter is, good relations with China go a long way. Bad relations could do some serious damage. Pushing them aside for a few issues around home at the expense of easing some potentially terrifying global issues doesn’t sound like a smart play.