Tag: Trade and Immigration

Monday Links

  • Burnt rubber: Obama’s decision to slap a 35 percent tariff on Chinese tires whiffs of senseless protectionism.

Obama to Impose Tariff on Chinese Tires

From the quiet shadows of the White House, at around 10 pm on Friday night, came word that President Obama will impose prohibitive duties of 35% on imports of Chinese tires.

Well, we at Cato and elsewhere have warned repeatedly of the dangerous consequences of this outcome (June 18, July 24, August 13, September 9, September 11). Former Cato colleague and coauthor Scott Lincicome has an excellent analysis on the ramifications right here.

The good news is that we now have clarity about where the president stands on trade. The bad news is that his stance reflects his isolationist primary election campaign rhetoric and not the post-election messages of avoiding protectionism and repairing the damage done to America’s international credibility by unilateralist Bush administration policies. Short of armed hostilities or political subversion, no state action is more provocative than banning another’s products from entering your market. I guess this paper was too audaciously hopeful. We’re chastened.

Technically, the Chinese are not legally entitled to retaliate because the United States has legal recourse to restrictions under this so-called “China safeguard” law until 2013. But plenty of American exporting interests have been worried enough to write numerous letters to Obama urging restraint–but to no avail.

Restrictions have never been imposed under this law because in all previous cases – all during the previous administration – President Bush exercised his discretion to reject the recommended duties because of the likely cost of those restrictions on the broader economy. Thus, the Chinese know the decision is a matter of presidential discretion, unlike the antidumping and countervailing duty laws, which are on statutory autopilot and don’t require the president’s attention. Accordingly, the tire restrictions are the edict of the American president, and thus carries more profound meaning for the Chinese.

One of the more thrilling spectacles in all of this, if politicians were capable of humility, would be watching President Obama explain his decision to impose tire duties on China at the G-20 meeting he is hosting in Pittsburgh in 12 days. Recall the president’s pledge (along with the other G-20 leaders) at the last G-20 meeting in London to avoid new protectionist measures.

American credibility on trade is spent. And maybe Obama will find comfort in that fact because he won’t be burdened with that historic responsibility, as he signs off on the slew of new requests for trade restrictions (which are undoubtedly coming soon) under this law from other U.S. industries seeking handouts.

Strap on your armor; the die has been cast.