Tariffs on China are a win-win for Beijing and Washington

On Friday President Obama announced that his administration would be imposing 35 percent tariffs on imported Chinese tires.
Both the New York Times and China’s Xinhua News agency presented this development in remarkably similar ways, noting that Obama was bending to pressure from the Steelworkers Union and that the measure would hurt the United States just as much as China. For its part, Xinhua was more colorful, using the aphorism, “sacrifice 800 to kill a thousand enemies.”
Far from being a lose-lose situation, this move by the administration actually benefits both Americans and Chinese.
The Chinese government has expressed sincere concern in recent months that the United States not default on its almost $2 trillion debt to Beijing (or use inflation to whittle away its real value).
While Xinhua faithfully reported that the tariff could eliminate as much as a billion dollars’ worth of exports to the United States, unmentioned was the fact that this also helps reduce the U.S. need to borrow from China, making it easier for future Americans to pay off the debt they already owe.  
The advocates of positive, mutually beneficial U.S.-China relations should welcome the Obama administration’s move and view it as a part of a broader effort to stabilize U.S.-Chinese economic relations.
The Bush administration largely refrained from imposing tariffs on Chinese products, and over the last eight years the Chinese yuan has appreciated only very modestly against the U.S. dollar.
Furthermore, according to the World Trade Organization, as of 2008 Chinese tariffs on a range of U.S. industrial goods were substantially higher than American tariffs.
For example, Chinese and (American) tariffs on transport equipment, electrical machinery, and the category “other manufactures” were respectively 11.5 percent China (vs. 1.4 percent U.S.), 9.0 percent China (vs. 2.3 percent U.S.) and 12.2 percent China (vs. 2.3 percent U.S.) respectively.
A mismatch in tariff levels and an undervalued Chinese currency together have helped create the large debt of today.
In 2009, with the U.S. industrial economy in trouble, the Bush administration’s negotiating strategy appears to have been less than successful.
Obama’s move should be viewed as a wise attempt to encourage the Chinese to revise some of their industrial policies, which over time will make it easier for the U.S. to pay back its debt and maintain stable, positive relations with its fourth-largest export market and one of the world’s most important countries.

Edwin Way
IU graduate student

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