President Obama’s slapping of tariffs on tires imported from China is the latest in a series of protectionist moves by the U.S. that threaten the world trading system, risk retaliation by the U.S.’s largest foreign creditor, and ultimately harm consumers. A Wall Street Journal editorial today titled “A Protectionist President” points out that Obama’s trade stance could be following in the disastrous footsteps of President Hoover.
The reality is that without the U.S. leading by example, the world trading order is likely to deteriorate into every country for itself. This is especially dangerous amid a global recession in which world merchandise trade volume fell by roughly 33% from the second quarter of 2008 to June 2009. Reviving trade flows is crucial to restoring global growth.
Mr. Obama may not intend to start a trade war, but then Hoover didn’t set out to pick one either. His political abdication is what made it possible, however, and trade passions once unleashed can be impossible to control. On his present course, President Obama is giving the world every reason to conclude he is a protectionist.
The Chinese have said they may retaliate on the tire tariffs by restrictions on U.S. chicken and auto parts. That indeed could escalate to the detriment of U.S. manufacturers and producers and the jobs they maintain. But U.S. consumers, especially lower-income consumers, could face immediate and substantial increases on lower-cost tires, many of which come from China. Some tire distributors estimate that the cost of a $50 tire could rise to $85. Since U.S. manufacturers mainly produce higher-priced tires, this protectionist move will do virtually nothing for U.S. jobs in the tire industry, except perhaps appease the trade unions, especially the United Steelworkers, which have been clamoring for more protection.