Monday, September 14, 2009

Firing The First Shot in a War

Last Friday, September 11, 2009, the Obama administration fired the first shot in a trade war against China. Clearly they were worried about taking this action since they waited until after the news deadline to announce a tariff of 35 % on Chinese tires on top of an existing 4 % duty.

There are strong populist/ protectionist winds blowing in the US. This isn't the province of just Democrats, but so far the Obama administration talks about free trade but doesn't seem to support it when their labor union pals want a payoff.

This has been treated as a minor story so far but China won't be treating it as a minor point. Trade wars have a funny habit of turning into depressions or shooting wars. This could end up being the biggest story of 2009. I hope not.


Here's the latest from the Financial Times on China's response.