Are You Prepared for Tarriffs?

Friday, February 16, 2007 2:34

Truth for Trade is reporting that The U.S. congress, specifically Congressman Sander Levin (Dem – MI), is preparing a bill that will introduce tariffs on China’s exports.

This release follows several politically charged events:

1) The 5 year anniversery of China’s WTO membership (see our post here)

2) The release of the USTR report on China’s WTO compliance (see our analysis beginning here)

3) The recent record breaking deficit between China and the United States (see reports from CBS, Forbes, and others here)

Introduced during a meeting in the Way and Means committee, Democrates presented a case of a China that manipulates currency, subsidizes industry, and protects domestic markets unfairly (see Letter and charts)

With 16 signatures on the letter to Bush, and what is to be a bipartisan push, the goals of the Democrates to show China they are back in power could potentially have significant impacts to trade relationships that are already strained.

The coming weeks are sure to be very interested inside the beltway as U.S. politicans are asked to make their decision on China.

In reading the press release, I am glad to see that the focus is not just China:

Our trade deficits with just three of our trading partners account for the majority of the total trade deficit

One problem… the three partners are China, Japan, and the E.U., and unless I am mistaken Africa, Latin America, South America, and Antartica are on producing much in teh way of high value finished goods.

Another problem here is (as pointed out here) is that the sole basis for the arguements are found mainly in statistics that are being skewed for political gain. The letter does not ackowledge the fact that many factories selling American goods to China are now in China, nor does it attempt to clarify that many of the manufacturing job losses are NOT from manufacturers moving to China, but are a result of technology and automation.

The other big red light for me comes later when the action plan is laid out:
1) Fighting Trade Barriers and Unfair Trade Practices.
2) Acting aggressively to stop currency manipulation by Japan and China……..
3) Enforciing rights in the WTO by bringing cases against China’s intellectual property rights violations, and E.U. discriminatory trading arrangements……..
4) Enforcing U.S. trade remedy laws vigorously……..
5) Ensuring U.S. workers, farmer and businesses have an effective means to address China’s rampant subsidization..
6) Pursue Meaningful Trade Liberalization Opportunities
7) It is also vital that you join us in ensuring that all pending FTAs, as well as the Korea FTA, bring about the broad sharing of benefits in the United States and abroad,
8) Enhance U.S. Competitiveness

Anyone wonder why the last item is to enhance U.S. competitiveness rather than first?

While the above list is filled with reasonable measures, placing Enhance U.S. competitiveness at the bottom shows that congress is not really willing to take the steps necessary (read risk votes) to address the situation and fix the situation.

So, for now, congress is going to take the politically easy route, and that means that you need to prepare yourselves, your clients, and your customers for what could be a significant pricing increase in your “Made in China” goods.

Expect the next 90 days to be filled with plenty of rhetoric, and expect tensions to rise. In the eyes of the chinese, they are taking steps in the right direction and are going at a place that will prevent a significant slowdown in the economy here.

To learn more about the U.S. political side of doing business with China, you can read our posts Inside U.S.-China Policy: 2 days of Testimony and How U.S. Policy May Affect Your Operations.

What would the effect of tarriffs be on your operations? Write a comment and let us know.

Expect to see a return shot from China tomorrow….

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3 Responses to “Are You Prepared for Tarriffs?”

  1. 4 Super Powers in 10 Years - Page 6 - Volconvo Debate Forums says:

    February 28th, 2007 at 8:55 am

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    March 1st, 2007 at 2:09 am

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