A tariff is a plan of duties imposed by a government on imported goods. Some countries impose tariffs on exports. The Increased imports from China contributed in the closure of US production facilities and the elimination of over 5000 US jobs. This prompted the US government to increase tariffs on Chinese tires by 35% (PBSNewshour, 2012). The increment of tariffs by the Obama administration was controversial because it contravened the agreements the US and China had entered into under the World Trade Organization WTO. China also threatened to retaliate against American poultry and automobile exports. The real beneficiaries of the tariffs are the American consumers and the workers who are assured of jobs and cheaper local products. Local importers of Chinese products are bound to lose. Tariffs increase the importing costs; American importers therefore sell at high prices which increases competition from local producers.
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China is not justified in making the accusations against since the issue at hand is case of trade policy violation and not free trade. Upon entry into WTO, China and US agreed that the US would take action should a surge in imports arise. China increased its tire imports from 15 million to 45 million (PBSNewhour, 2012). This led to the loss of 5000 American jobs which was detrimental to the growth of the US and the satisfaction of key presidential pledges. If China imposes restrictions on its own, the US would lose a key target market while the WTO would be called in to sanction trade between the two countries (Swanson, 2011).
The US is not justified in taking actions against. The terms of the agreement that the US and China got into was allowed free trade which is what China engaged in with American importers (PBSNewshour, 2012). The US is not following sound trade policies by differing with an agreement bound by free trade between countries. The government could be addressing the problem m to ensure specific groups of people benefit from the increased tariffs on Chinese imports (Swanson, 2011). The US has dominated the world’s tire markets and therefore the increment in tariffs on tires could be to curb tire imports and benefit some industries in general.
The decision by president Obama to impose tariffs on Chinese imports could hurt the American economy. In the face of global recession there is need to exercise caution to avoid braking ties with a key market. China is the world’s most populous nation thereby providing a strategic target market for US products such as poultry. A retaliatory measure by the Chinese government could serve to worsen the economy of the US (Swanson, 2011). The decision also creates poor relations between China and the larger Asian trading block which could mean a massive loss of market for US products.
The president must consider real national interests when imposing punitive tariffs on Chinese imports. The government must consider surges and the conditions set by the World trade Agreement WTO. The government must also consider mutuality or the interest of all parties involved before embarking on implementing drastic economic measures. Moreover, the president must consider the prospects of a trade war. He should therefore consider the timing and the possibility that the US could suffer the most in case of such as ‘ war’. The government should also consider the domestic manufacturing potential prior to implementing drastic trade measures.
PBSNewhour (2012)Trade Tensions Flare Between U. S., China as G-20 Nears. Retrieved 2
June 2012. http://www. pbs. org/newshour/bb/asia/july-dec09/trade_09-15. html
Swanson, I. (2011, September 9). Obama hits China with steep tire tariffs – TheHill. com.
TheHill. com. Retrieved June 3, 2012, from http://thehill. com/homenews/news/58383-