Sit back folks, I think we’re heading for a big time trade war with China. Obama announced that the US is going to start imposing tariffs on Chinese imported tires. The U.S. has placed a 35% tariff on the almost $1.8 billion in tire imports from China. This was not done out of sound trade policies, but to appease his buddies who work for the UAW. They claim that this measure will save 7000 UAW jobs. Yeah, sure, just like the millions of jobs created or saved by the Stimulus bill?

As they say, no good deed goes unpunished and China has already retaliated by investigated subsidies and claims of dumping of American chicken and auto products. China (rightly) claims that this is unfair trade practices prohibited under the WTO. Dumping is basically a forming of underpricing goods and subsidizing the cost so that they are more competitive in the International market. Now, to be fair, China does this all the time, but that’s no reason for the U.S. to start doing it as well. China is also appealing the decision to impose these tariffs to the WTO, which, if it has any brains, will rule in China’s favor and block this tariff.

What is so mind-numbingly stupid about this move is that it once again shows the Obama administration has no clue about anything when it comes to economic matters. Most economists agree that one of the triggering factors that led to the Great Depression was the passage of restrictive tariffs, thus causing what was a recession to certainly spiral into a depression. The great fear is that this can lead to ever escalating retaliatory responses from other governments as we start to enact protectionist policies to “save” American jobs. Even flaming liberals like Thomas Friedman agree that “the world is flat” and that our economy is very interconnected with all of the economies of the world. When Obama interferes in the market like this to save jobs, in the long run this could really hurt and cost more American jobs. If China decides to stop buying our chicken and cars in response, how many jobs do you suppose that will cost us?

This is why free trade is in all of our best interests. Ultimately American jobs depend upon the services and products that we export to China and India (with a combined middle-class of about 600 million people, twice the population of the entire U.S.) and other countries. If we start screwing with those relationships and put restrictions on global trade it will turn this Great Recession into a full out Depression. This is not Chicken Little, this is just plain economic sense.

You can watch Obama defend this asinine decision here:


Obama Defends Tariffs