If there’s one group that HUMMER could use on its side right now is the Chinese Ministry of Commerce (MoC) – the regulatory committee that deals with all inter-state trade issues, including the approval process for China’s Tengzhong to purchase HUMMER from GM. Last week, President Obama imposed new tariffs on Chinese-made tires, angering the MoC, which could have an effect on HUMMER’s approval process.
The United Steelworkers Union (which includes tire-workers) complained to the administration that they had lost 5,000 jobs since 2004 because more and more production was being shipped overseas to China, and suggested Obama impose a 55% tariff on imported tires. Companies like Goodyear, Michelin, Cooper and Bridgestone typically moved manufacturing of their inexpensive, low-end tires to China to reduce costs while keeping higher quality/performance tire manufacturing in the United States.
None of the tire companies were on board with the tariffs, and Cooper Tire even publicly denounced the idea.
Unfortunately, Obama bowed to the unions and imposed a 35% tariff on Chinese-made tires which angered the Chinese MoC. Immediately following the action, the MoC said Obama’s move sends the wrong signal and could spark a chain reaction of trade protectionist measures that would “slow world-wide economic recovery.”
On Sunday, the MoC launched an investigation into “unfair” U.S. trade practices in two commodities: Automobiles and Chicken. On Monday, China requested the World Trade Organization make a ruling on the U.S. tire-tariffs that they claim are in “violation of WTO rules.”
Does Obama really think that imposing tariffs will bring back tire jobs to America? That the tire companies won’t move to other inexpensive production countries like India or Mexico? That it won’t cause millions of Americans to pay artificially inflated prices for tires? That the Chinese won’t retaliate with their own trade restrictions, causing American job loss in other sectors? The lack of foresight is appalling.
While the HUMMER deal doesn’t have huge economic implications for either the U.S. or China, it is a very public regulatory battle. The Chinese MoC, which is probably suffering more from international embarrassment than economic stress right now, could send a very visible statement to the U.S. by turning down the HUMMER deal. Helping one of America’s largest companies, GM, is probably the last thing on the MoC’s to-do list as they ramp up trade retaliation against Obama and the United States.
One hopes that the MoC would also weigh-in that a Chinese company, Tengzhong, also stands to prosper from a successful purchase of HUMMER. However, the high emotions of the situation between countries could cloud the MoC’s judgment.