The Rubber Chicken Trade Fight With China

Weapon of The President of The United States

Tariffs are taxes on imported products that are brought across the border. The President is planning to hit 50 billion dollars worth of Chinese imports with a 25% tariff in retaliation for what he says are China's unfair trading practices. In return, China states it will strike back with its own tariffs on US products. The President has also talked in the past of imposing tariffs on companies that close US factories, relocate abroad, and try to sell their products back to the US. The tariffs earned a bad reputation. Manyanalysts blame the Smoot-Hawley Tariff of 1930 for making the Great Depression worse by discouraging countries from trading with each other. Tariffs also drive up prices for consumers by making foreign products more expensive and allowing domestic companies to raise their prices because they face less competition. Decades after World War II, the U.S. pushed countries to lower tariffs.

The US has sometimes used tariffs to punish countries that they accused of trading unfairly. That's how the U.S. got into what became known as the rubber chicken trade fight with China. In 2009, the Obama Administration imposed tariffs on Chinese tires in an effort to protect American tire manufacturers. China retaliated by taxing American chicken feet, which is a throwaway item in the US that is considered a delicacy in China. Analysts figure the tariff fights saved 1200 jobs in the American tire industry, but it also drove up the price of tires as domestic producers raised prices, which in turn, America imported tires from countries other than China. In the end, one think-tank estimates that American consumers paid an extra $1.1B for tires in 2011 that's the equivalent of 927 thousand dollars for every job saved.

The United States imported $337 billion worth of goods from China in 2008. It exported $72 billion to the mainland. That is a trade deficit over $260 billion in the favor of China, up from $69 billion in 1999. Members of Congress and certainly a lot of labor leaders believe that the US’s disadvantage in the figures is unfair and that the Chinese impose barriers to US goods. This is not at all unlike the accusations that America made about the Japanese decades ago.

The charge that the overall balance of trade is believed to be a conspiracy is absurd on the face of it, but that does not mean that the Chinese are above abusing the system.Large American companies such as Wal-Mart could not make any profit at all if they could not import most of their goods from China. That may be true for many large American retailers. Wal-Mart has begun to take advantage of the rapidly growing consumer base in the China, but its reasons for not capitalizing on the market are unlikely to be related to interference by the Chinese government. Wal-Mart can only build, staff, and create supply chains in the country so quickly.

Politics will play a big role of this trade war as the reality of rubber tire production and chicken processing will be. It isn’t a war over one import or another, but a war about the future of the largest economy in the world and the fastest growing economy of any big nation. That will make it more than likely both lengthy and bitter, especially as joblessness in the US increases and someone has to be blamed for that misfortune.