Trade War Looming? Or… Nothing Else to Write About?

Sunday, July 1, 2007 20:05

The last few weeks have certainly been the rockiest for U.S. China trade relations in a long time…. Adding to the normal news cycles of a ballooning trade deficit and a RMB that just won’t revalue, the last 4 weeks have seen stories on pet food manufacturers cutting corners, tire manufacturers cutting corners, toy train manufacturers cutting corners, and a whole host of products that are unsafe for the American market.

In the words of Senator Durbin (D – IL) “Made in China’ is rapidly becoming a warning label for American consumers”.

But is it? I mean… is it really?

Were I basing my judgment on MSNBC’s coverage, I would not only answer yes.. I would be writing this from the airport as the last three relevant articles were Tainted Chinese goods could lead to trade war, What to do when everything is ‘Made in China?’, and (my personal favorite) All-American: Top 10 most patriotic cars

Starting to wonder if WalMart is going to change its sign back to that of the mid 80s “Made in America?

Well.. there are defiantly more and more calls for it, and groups like Wake Up Walmart are certainly taking WalMart to task recently on the amount of goods they purchase in China, but I would not expect there to be a renewed “Buy American” campaign anytime soon.

And here are a few reasons why:

  1. While there have been a number of severe cases lately of tainted supply chains, the Chinese are doing a much better job of showing that while there are problems – they are anomalies not the norm, and that goods made in China are safe.
  2. With the recent cut in VAT rebates, China now has a strong macroeconomic peg to stand on, and will do so to cool off the pressure from Bush & Co..
  3. There are too many U.S. owned factories, producing too many goods for the U.S. market, that are not coming back.. and a trade war would impact them a lot more than any Chinese manufacture as they risk having to reinvest in other countries.
  4. Finally.. and most importantly… nearly every economist I have read lately has said that a trade war would result in higher inflation and higher interest rates for Americans.. and that is something no politician wants before an election. Political mud may be slung, but the gloves will stay on to ensure reelection campaigns go smoothly.

A few things I would really like to see at this point:

  1. Media attention on the responsibility importers have to perform quality control on goods manufactured outside of their own supply chains
  2. A study done of the impact U.S. investments in China have on the trade deficit (please send me email if you have such a study)
  3. A study showing what the U.S. recession would have looked like were China not able to provide low cost manufacturing… could the U.S. come out so quickly were it not for China?

To date, for me the only prove safety issue has been the pet food, and all of them could have been avoided were proper quality teams and procedures in place… and I think that the recent FTS case is a perfect example of that (read more on my thoughts about FTS here) .

However, media being media, politicians being politicians, and people being people… I am sure anything can happen.. and it is now my responsibility to ensure I am prepared for whatever happens.

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One Response to “Trade War Looming? Or… Nothing Else to Write About?”

  1. University Update - Google - Trade War Looming? Or… Nothing Else to Write About? says:

    July 1st, 2007 at 10:03 pm

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