Posted on 09/11/2009 7:17:37 PM PDT by Orange1998
President Barack Obama on Friday slapped punitive tariffs on all car and light truck tires entering the United States from China in a decision that could anger the strategically important Asian powerhouse but placate union supporters important to his health care push at home.
Obama had until Sept. 17 -- next week -- to accept, reject or modify a U.S. International Trade Commission ruling that a rising tide of Chinese tires into the U.S. hurts American producers. A powerful union, United Steelworkers, blames the increase for the loss of thousands of American jobs.
(Excerpt) Read more at finance.yahoo.com ...
Get ready for them to dump all those US treasuries they hold...
Most don't. It's not the hell-hole most Americans think. Most are so ignorant of what China is that it's downright scary. I had one FReeper on another thread insisting I was wrong, there are "two" currencies in China, one called a Yuan that is used to pay the slaves here (do you pay slaves?), and the other being the RMB for "official" use only.
I've never seen two currencies, no one I know has, and it doesn't exist. But oh no, I was wrong, I'm just a ChiCom troll here...
Anyway, walking in downtown Shanghai, you'd think you're in any crowded city around the world, except 96% of the people are Chinese and everyhing is in Mandarin and English. Taxis, skyscrapers, stores, parks, subways, etc. You want local food? No problem. KFC, McDonalds, Coke, Pizza Hut? All here. Sony, RCA? Available. Want a new Ford, Buick, Audi, Mercedes, VW? No problem - we go shopping!
Some places in China are still hell-hole, 3rd world areas. Others - downtown/central Shanghai, Bejing, Xiamen, Hong Kong, etc. - are about what you'd see in Madrid, Rome, Brussels, London, New York, Chicago, LA... Some really nice areas, some not so nice ones, but in general a decent place.
Overall, I would encourage everyone to take a week-long trip to China just to see what it's like. Go to Hong Kong for 2-3 days, go to Shanghai for 3-4 days, then head back. You'll learn a lot!
There, I agree with you. I’ve maintained here on FR that in the US, we have a “free market” in only illicit drugs and prostitution outside Nevada.
In fact, I would posit that now, all trade conducted in US dollars is no longer a “free market” - being that the Fed is manipulating the value of the US dollar as far as it is.
Hong Kong outstrips the US on ease of business formation by a mile and then some.
I would also posit, however, that mainland China won’t resemble Hong Kong (pre-99) in anything but superficial ways. The banking system in China is seriously command-driven, much to their future detriment.
They won’t “dump” Treasuries. That would be really stupid of them to do.
What they no doubt want is a much higher yield on new paper. Anyone buying US Treasury debt right now knows you’re being compensated far, far too little for holding that paper long-term. Prior to this week, short-term Notes were selling well because there’s a high confidence that the Fed isn’t going to raise rates before the end of 2010, at the earliest.
All the PRC has to do to effect higher yields on US Treasury debt is start slowing down their purchases once the Fed stops their QE purchases and thereby reduce the bid-to-cover ratio on US Treasury auctions. Get the bid-to-cover ratio down to, oh, I dunno — 1.5 or less — and the yields will start going up pretty quickly. This past week has seen BTC ratios over 3.0, which sends a signal to the Treasury “Sure, we’re suckers for your paper!”
Prior to the election in Japan, this might have been a much more hypothetical outcome — but with the new political leadership in Japan, it might just come to pass that China and Japan both want a higher yield on Treasury debt.
I think one issue is that much of the investment and returns in your equation come from overseas production and foreign subsidiaries of US companies.
For example, tires. Goodyear. They have a massive factory in Dalian (in the North, where the better aluminum smelters are). They make tires for the Asian, EU, and US markets. Would tires made by Goodyear - a US company - in China be subject to tariffs when brought back to the US?
If so, then you will reduce the profits and sales of Goodyear China operations.
It’s not a simple “take from here and you will get more there” type of game, because of the nature of business. Tariffs will actually hurt US companies who have wholly owned manufacturing plants overseas, thereby reducing investment AND consumption.
Give it 15-20 years and it'll be closer to Hong Kong than the current Chinese affairs and lot more free.
China's learned that the Hong Kong approach (and the Taiwan approach) works, and works well. They're not stupid, they're working to change their systems and are starting by opening up autonomy for more and more cities/regions. Shanghai and Beijing are gaining more autonomy and freedom in how their financial and political worlds run...
I hate to say this, but China is moving towards the economy that the US had in the 50s and 60s, and we're moving towards the economy they had in the 50s and 60s. I don't like that trade!
No, it didn’t help, but the cherished chestnut among the “Free Trade for all!” boosters is that S-H *caused* the Depression.
I maintain that the recent data show that it is now impossible to attribute the worldwide economic collapse of the 30’s to S-H anymore. If anything, protectionism is a result of the collapse of trade, not the other way around, and most people forget that we had trade restricting laws put in place to bolster the prices of ag commodities in the 20’s - long before S-H, we had Fordney-McCumber in 1922. People forget that in the 20’s, ag was fully 30% of the US economy, and that ag commodity prices were declining from about 1925 through to the 30’s, and presaged the collapse in the US economy when the Dust Bowl made its appearance.
Like most of the cherished mythology of the “free trade” movement, the idea that S-H was “responsible” for the Depression will die hard, but I now believe that it will (with a high degree of certainty) die, along with “free trade” as a viable economic policy for the US going forward.
That is true, but the profits for US companies that outsource jobs are going to be coming under increased taxation, and quite likely soon. Congress is looking to close the yawning deficit and taxing companies that “send jobs offshore” is a very popular political target, and the taxes can be implemented without running afoul of any trade agreements.
A tariff is a tax on a product, and runs afoul of the agreements. Taxing profits — not so. Taxing executive compensation? Even easier to pass.
The problem for all of these companies is that very soon, they will have a significantly reduced market for their products in the US because the US consumer won’t have wage growth to buy said products. As it stands now, ALL the job gains of the last 10 years are gone. ALL of them. Actually, more than all - we have just crossed a threshold where we now have fewer jobs in the private sector in the US than we had 10 years ago.
Why is that? Because of what you just said: Goodyear put their new tire plants outside the US and are exporting the result back into the US. Well, that worked as long as the US consumer was able to extract a seemingly never-ending increase in home equity via HELOC’s. That’s now over and done with - for at least a decade, if not more. US Wage growth was stagnant throughout the last 8 to 9 years, except at the highest ranges of income. This is not a sustainable model on which nations outside the US can export to the US. In order to peddle exports to the US, you need a US consumer who has money to spend. Absent more reckless lending, the US consumer has had no increase in organic spending power over the last 10 years... and they’re likely to not have any more spending power in the next five to 10 years at the rate we’re going, either.
What will happen, is the same thing that happens every time a debtor country goes critical mass. We will inflate. Big time!
This is what China, and japan are concerned about but it will happen slowly like a boiled frogs.
It's happening now. Most people just can't see it.
In a few months you should hear the first complaints about prices in the grocery store. I see that now, and the government is cooking the data to hide it. One number that you will see benefit will be GDP!
I would not worry too much about GDP. You are right about import/export ratios being off, but as long as we are importing so much energy, and inflating, we will never have that under any sort of balance or control. We can't make products cheaply anymore so we won't be doing that either.
What we have left is intellectual property, Financial and heavy stuff but that is under tax and regulation assault by Obama and company.
If you think I am being a bit dour, you are correct. I have very little hope that my country will survive this without losing a great deal of our standard of living. We will be sent back to the fifties.
Look for the double dip recession to begin in the first quarter of next year, maybe a bit sooner. We will be in this recession for a long time, and tariffs will be one of many issues. I expect a trade war to break out. I am also waiting for the clunker cars to start showing up in the bank parking lots with "assume Note" signs on them. It won't be long. All this stimulus crap is going to hit the fan.
Add this to the horrible management we already see coming, and the political unrest, and you have a real danger of total and complete breakdown. Just the thing that fascist government always seem to cause.
No, I'm not too worried about the GDP numbers anymore. I was, about six months ago but no longer. The numbers don't reflect growth anymore. On top of that, the rest seem out of the ball park and un-real. They don't reflect reality and what the companies are seeing in their markets. Oh they say they might see slow growth ahead.
What they really see is a better quarter due to low inventories, payment floats and savings from layoffs. So called productivity went through the roof.
This is all a sign that there is a storm coming.
At the rate that the PRC is making unsustainable loans, they’re begging for the next bubble to be theirs, not ours. That’s what stands between here and there.
As we’ve just learned in the US, reckless lending standards and “Make Believe Banking” leads to hugely disruptive economic disruptions. The Chinese would be better off to adopt the practices of nations with much more sound banking practices (eg, Canada) and not play the Asian game of “public banking statements” vs. “private banking statements” — because the outcome of that game has been on display in Japan for the last 15 years.
While I agree with you that China is making large strides in manufacturing, they’re still idiot communists on their ag and food policy, and the ag trends in large areas of China are very worrying. Hungry people don’t make for stable governments. To quote a fortune cookie I once received in a Chinese restaurant in the Bay area of CA:
“An empty stomach make a poor political advisor.”
Yeah, I have never been there, but I watch a few finacial shows produced in HK and Sing. They often talk about the prices of goods, services and realestate in China coastal as opposed to inland and explain why.
If I remember correctly, this didn’t work out well for Roosevelt when he tried it...GD2
To little and way to late. How about a well thought out policy instead of stupid knee jerk reactions? Oh well let the trade wars begin. Hope we win.
Maybe so but have you notice they are picking up commodities at a fast pace. Trading Bonds for Commodities sure way out from under the spell.
Nothing like the truth from the horses mouth.
Your posts have been spot on. Unfortunately, too many on here are just so ate-up over Free Trade with Communist China.
Chairman Mao must be dancing in hell with all the support he is getting in the US.
Yes, the US is the only nation with a true open market. Most nations have tariffs and/or non-trade barriers on US goods. The Euros use VAT rebates to make it harder for US products to compete with their own products, and the Communist Chinese artificially float their currency to keep US goods artifically high price (and artificially lowering Chinese goods). Both the Euros and the ChiComs also heavily subsidize their industries and agriculture to keep their products low priced for import.
Of course, you have the GlobalBots yapping about Smoot-Hawley. The Smoot-Hawley Myth is probably one of the most ignorant of all economic explanations...and borders on the Protocols of the Elders of Zion for outright fraud. The Smoot-Hawley Myth has gained traction because we are now undergoing an economic recession/depression during the era of Liberal Free Trade. They cannot justify how Free Trade “works”....so find another target
Smoot-Hawley did not cause the Great Depression....nor even added to it. In most years when Smoot-Hawley was in effect, the US GDP rose...not dropped. Also, even if there was no Smoot-Hawley, the US had no one to trade with. Europe was an economic basket-case after WW I....and the only possible trading partners were Militaristic Japan and Stalin’s Soviet Union. But, hey, the Free Traders probably would have loved trading with Stalin as much as they do Mao’s children and grandchildren.
And, the US trade deficit makes Third World countries laugh with hysteria. Over the years, our trade deficit has been TRILLIONS of dollars.....TRILLIONS to Communist China, alone. And, there are people stupid enough to believe that trade deficits are good! If trade deficits were the case....Africa would be the economic ginat of the world.
A trade deficit means that more wealth and money is leaving your country....than you are bringing in. Now, if that wealth was kept inside the US....there would be more jobs, LOWER TAXES, and a stronger economy.
The utter insanity of people thinking it is great for the ChiComs to own our debt. It would be better if they invested in our wealth.
As for Obama putting the tariff on the Chinese tires....this actually was a decision made three years ago by the WTO (no friend of America, Free Traders)...shccking that the US has won a WTO case. The eerie thing is that the Kenyan Communist is actually doing the proper thing on the Chinese Communists.
Unfortunately for Free Traders....Communism is not ice cream....you do not get to pick your favorite flavor.
Just hang in there with the Nattering Nabobs of Free Traderism. Their theories cannot be supported with facts. And pardon my long post....had I replied to one of the GlobalBots....I probably would get booted from FR
Smoot-Hawley did not cause the Great Depression....nor even added to it.THIS I gotta see ...
True. They’re accumulating tons of copper cathode.
If we lose reserve status on the USD, and China offers a “deal” like the Bancor, He Who Owns the Most Commodities Wins.
Well, I’m a bit surprised I haven’t been called a ChiCom troll or Maoist or traitor (directly) yet, but there’s still hope for this thread!
In the mean time I’ll keep posting my experiences and what it’s really like over here and hopefully a few people will stop and think about what is the real source of the shrinking US manufacturing base...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.