Posted on 09/19/2009 11:37:21 PM PDT by bruinbirdman
We've entered an era of decreasing global commerce.
"The smell of trade war is suddenly in the air," The Wall Street Journal stated on Monday. Perhaps America's premier business newspaper is correct, but something far more momentous is now occurring.
The Journal, of course, was referring to the brewing conflict between Washington and Beijing. Friday evening, President Barack Obama accepted the recommendation of the U.S. International Trade Commission and imposed Section 421 tariffs on Chinese tires. China, in its World Trade Organization accession protocol, agreed that the United States could collect transitional tariffs on Chinese goods to minimize injury to American manufacturers caused by surges in imports. President George W. Bush rejected all four Section 421 "surge" applications that landed on his desk.
Beijing's first reaction to Obama's tire tariffs was mild, but China's internet community caught hold of the matter and it went viral. The Chinese government then immediately reacted. Monday, the Commerce Ministry said it would initiate talks with Washington over the tire tariffs, the first step in launching a WTO proceeding. Tuesday, the ministry stated it would start investigations targeting American chicken and auto parts to see if they were dumped on the Chinese market or benefited from subsidies. Although Beijing noted that the U.S. exports subject to the investigations are about equal in value to China's tire exports to the U.S., it denied any retaliatory intent. The Commerce Ministry's actions, it maintained, were in reaction to complaints it had received and were "based on the facts."
There are reasons why this dispute should blow over quickly. After all, the amounts involved are relatively small, the tariffs are temporary and each economy needs the other. But if the tiff grows, as The Wall Street Journal fears, it will be because it is taking place at a particularly
(Excerpt) Read more at forbes.com ...
Payback to some of Obambi’s union thugs...
"Virtually every critic of the Section 421 tariffs has said President Obama imposed them as a favor to the United Steelworkers, which had filed the petition seeking this relief. Perhaps the charge is true, but that explanation ignores far more important structural factors. In a world of declining demand and shrinking trade, nations perceive less of a need to cooperate with each other. They will, at a minimum, insist that their own manufacturers not be disadvantaged by other governments."
"So the Section 421 surge tariffs cannot be explained as an isolated concession to a powerful lobby--they are the beginning of Washington's recognition that the period of ever-expanding global commerce has passed. We have not, in short, witnessed just the first shots of a trade war. We are at the beginning of an era of decreasing trade."
yitbos
And what happens if the ChiComs not only refuse to buy more US debt, they start selling off what they have?
More union favors of course.
Some people here I know think it's good that Chinese imports like these are getting tarrifs placed on them, but they fail to realize that this can cause us a lot more harm than good, because the exports we send to China, such as auto-parts, heavy equipment, autos, etc. are worth billions more to American based companies, and could cost us a lot more jobs than these unions pals of obama's hope to preserve. Plus unemployed people aren't buying anything, American or otherwize.
yitbos
Like the Japanese who sold massive amounts of US sovereign debt in the 90’s,they(the Chinese) will lose lots of money.
If they refuse to buy new debt,it puts the US Congress on a budget.
The Chinese selling debt they already own is no different than a bank selling an existing mortgage to another bank. The loan merely changes hands. In fact, the Chinese have to find buyers to sell debt they already own. If no buyers exist, they can’t sell it. It is possible they can sell it, but at a significant discount in which case they lose money.
The Chinese refusing to buy new debt may actually be a good thing if the Fed doesn’t monetize the debt. The government will either have to raise interest rates to attract new purchasers of debt or lower spending or some combination of both.
The worst case is the US government being unable to sell debt and the Federal Reserve printing money to buy it. In that case hyperinflation is around the corner.
This should weaken our economy even more and limit the long term non-economic damage that obama can do. I’m all for that, since we can recover from another depression much faster than we can recover from socialism.
Your last sentence is the most likely scenario (monetize debt).
Selling debt has the same impact as the Treasury going out with more debt offerings. It will push up interest rates for the Treasury. The problem for the Chinese is that they need to gradually exit their debt position otherwise they devalue their own holdings as interest rates go up.
Interest rates will not lead to reduced spending. The debt and deficit are not even on the radar in Washington (both parties are to blame).
Treasury Inflation Protected Securities are going to become really popular going forward.
This year the Social Security Trust fund will mostly likely go negative in cash flow (the Trust Fund may continue to grow but it will be interest payments from the Treasury on current debt holdings). Instead of reducing the amount of securities the Treasury has to sell, the S.S. Trust fund will increase it.
Gee maybe Obama can convince Pelosi and Reid to push through another Smoot Hawley tariff and really push the US economy into a depression.
We will soon be like Cuba because we don’t manufacture anything anymore. Everything is made in China or India.
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