Trade Dispute Erupts In WTO: US Files Against EU, Four Others, China Against US
The WTO has a lot of challenges headed its way. Trade Guns are blazing and more will follow.
U.S. Trade Representative Robert Lighthizer filed Five WTO Challenges against China, the European Union, Canada, Mexico and Turkey for imposing "illegal tariffs against U.S. products".
US Actions Justified Says Lighthizer
“The actions taken by the President are wholly legitimate and fully justified as a matter of U.S. law and international trade rules", said Lighthizer.
Response Not Justified
"Instead of working with us to address a common problem, some of our trading partners have elected to respond with retaliatory tariffs designed to punish American workers, farmers, and companies”, said Lighthizer.
"The United States will take all necessary actions to protect our interests, and we urge our trading partners to work constructively with us on the problems created by massive and persistent excess capacity in the steel and aluminum sectors.”
China Fires Back
NPR reports China Files WTO Complaint Over U.S. Tariffs On $200 Billion Of Imports.
China has filed a case with the World Trade Organization against the U.S. to protest the Trump administration's plan to put new tariffs on $200 billion worth of Chinese imports. China says the tariffs are illegal attempts at protectionism.
China's Ministry of Commerce announced it is pursuing legal remedy against the U.S. in a brief statement on its website — the latest in an escalating trade conflict between the world's two largest economies.
The WTO complaint comes less than a week after the Trump administration published a preliminary list of more than 6,000 Chinese products that it wants to hit with an additional 10 percent duty. The list targets products worth a total of $200 billion, ranging from an expansive range of seafood and vegetables to stones, metals and plywood
More WTO Complaints Coming
Apparently, it is OK to place Tariffs on absurd national security charges but it is not OK for countries to retaliate.
This is just the start of WTO filings. Canada, the EU, Turkey, and Mexico will all follow China with counter-charges.
Two Problems
- It may take years before the WTO rules and these charges.
- Trump does not give a damn what the WTO says.
Only one opinion matters to Trump: His.
Meanwhile, it seems that no one in any of these disputes has figured out the common-sense maneuver: No Matter What Any Other Country Does, the Correct Action is to Eliminate Tariffs.
Disclosure: None.
I think you are correct that tariffs cause trade attacks. What is your opinion about unfriendly trade practices of other countries toward the US (the most visible and obvious being the Chinese government subsidizing steel exports in China, glutting the market)? Even if Trump is a damaging presence (which is a separate discussion), these issues require some kind of attention. Trump's solution is getting blasted from many angles, but I haven't heard too many alternatives. Additionally, even if someone has an alternative, lots of leaders in the EU and USA don't have the obnoxiousness required to stand up against rapacious countries like China.
Any thoughts?
Well, I am not the author, but seems to me like selective tariffs are permitted within a generally free trade world. If China has young industries or if the US wants to protect a few industries, tariffs could be ok. However, as John Mauldin has said, tariffs that are placed on raw materials, like steel and aluminum, raise the cost of production and hurt American manufacturers. www.talkmarkets.com/.../john-mauldin-discusses-what-could-go-wrong
When another country subsidizes their domestic steel businesses to create a situation where the domestic companies can “dump” steel into the global market at depressed prices, but still be profitable because of government subsidies, that is a negative tariff. In other words, China created a tariff by doing that. It is also a violation of free trade. If the international community refuses to stop them, individual leaders will be elected that will try. We are seeing that now. This doesn’t mean everything Trump does is smart. But this is a reaction that was easy to foresee in the steel marketplace. It’s been going on for a decade.
So, the negative tariff of steel helps US manufacturers compete in the world. You must want to make them non competitive. Again, basic rule of John Mauldin, don't tariff raw materials or the party is over.
What I mean by negative tariff is that China is making the steel markets non competitive, by subsidizing their companies. When USA raises import prices (a positive tariff), China’s products sell in the USA for raised prices. When China subsidizes their steel companies, that allows Chinese steel companies to undercut USA prices, due to government support. This means Chinese steel is cheaper (a negative tariff, meaning a negative tariff by China is the equivalent of a positive tariff by the USA), and that USA steel isn’t bought. This is a violation of free trade, because of the Chinese government intervention. China has been effectively putting tariffs on steel for a decade by doing this. The USA is finally reacting.
I understand this. But cheap steel makes manufacturing in the USA more affordable. Put tariffs on steel and US manufacturers are toast. Look at the guys that make the nails. This is not complex, but Trump has people sucked in.
But that’s a fake market. The manufacturer overhead is artificially reduced because of malicious economics. Those businesses are used to inflated profits and cushioning that result from damaging actions. It’s true that it’s not great for them, but that’s how free markets work. Now those manufacturers have to cut overhead and expenses, to get leaner and meaner. Business cycles always move like this.
The radicals in the administration have lost it on many fronts. I lost brain cells watching Trump and Putin. Economics is much more complicated than that.