Obama’s Angering of Chinese Could Delay HUMMER Deal

ObamaChinaIf 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.

ObamaSteelworkersUnionUnfortunately, 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.

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  1. “The lack of foresight (of the Obama administration) is appalling. ”

    Who would have guessed!

  2. As a conservative, I oppose this type of tarriff. As a displaced worker who lost his job to someone from India, I applaud the tarriff. We need to start to stand up for Americans. Otherwise, no Hummers becuase there won’t be anyone left here to buy them.

  3. There’s a reason jobs are being shipped overseas, and it has to do with costs — in this particular case (and most automotive cases) one of the biggest costs to manufacturing is the unions. Obama should be figuring out how to reduce business’s labor costs in America instead of pumping up unions – that’s what will bring jobs back, not Tariffs. Tariffs to a single country will just make them shift to another country, like India. The tariffs won’t bring a single job back to the United States, and if the Chinese start imposing restrictions on U.S. products, countless more American jobs will be lost.

  4. To Admin: When you lose your job and your family is affected, tell me all about the great decisions our greedy CEOs and other senior executives are making to ensure their multi-million dollar annual salaries continue while the rest of us are out of work. Stop blaming American workers and unions (I’m not union by the way). The problem is greed at the top and Ostriches like you.

  5. Jim:

    How would you rectify the “greed at the top” problem that you feel is at the root of American job loss?

  6. Can you be more specific?

  7. Let me say a bit more. I’m a conservative, believe in the free market and think that the tarrif in principle is the wrong approach. With that said, we are at a challenging time in our country. Both governmental leadership at all levels (it’s your money, my money and our money, not theirs to take as they wish) and in my opinion, private sector leadership, to include Union leadership, which is letting us down. The result is pretty grim picture for mainstream Americans. Higher taxes, lower pay or no pay, and less and less personal freedom as governments pass more legislation to control our lives. We’re losing our homes, our ability to care for our families adequately and our individual freedoms-and no one cares. What do we do?

    We can influence the government by speaking out against what they are proposing and by voting in new representation. And if they don’t listen to what we say, vote in a new group next time etc. As far as corporate leaders are concerned, not much we can do. They are the feudal lords of the 21st century and certainly not accountable to anyone or so it seems. They cloak layoffs as necessary for corporate survival but don’t share the pain they put people through. Of course the government can step in and penalize them for bad behaviour in the form of higer taxes. However, I don’t trust our present elected officials to act responsible and effectively-and don’t want them to step in. Hence the frustration.

    The good news is that this will pass. We’ll muddle through. My grand parents and parents did during the depression. My parents made it through WWII and Korea. I survived Vietnam and the Carter years. We’ll eventually get it right.