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HICKS: Chinese tariff is misstep toward trade war

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Mike Hicks

Just a short year ago, economists of all stripes voiced fears of a rise in economic protectionism like that which contributed mightily to the Great Depression. I’m thankful cooler heads have prevailed and the worldwide recession now eases.

President Obama’s decision to levy a tariff on Chinese tires marks a troubling departure from that one area of economic serenity. By making the announcement late on a Friday evening, the president surely hoped to miss another catastrophic news cycle of the likes that have plagued him for weeks. By levying the tariff on a small industry, he sought to bolster flagging domestic support with a dose of 19th century protectionism. It is pure politics of the rankest sort.

Let me be clear that this foolishness has long bipartisan roots. George W. Bush was also guilty of protectionism with steel tariffs. The industry was far larger, but we were not then in the grips of a global recession. At least Mr. Bush learned one lesson and did not repeat the mistake, but in this matter both men failed their country alike.

It’s no surprise that, in light of this policy misstep, Mr. Obama is well blessed with an economic team who understands the need for free trade. His economists and supporters—especially Paul Krugman—are strangely silent on an issue upon which they built their reputation. Indeed, Krugman was elevated from tweedy professor to national columnist based on a popular book castigating the Clinton administration for far smaller lapses in judgment.

The president’s choice of timing is suspect for another reason. Coming as it did while Indiana Gov. Mitch Daniels was in Asia on a highly publicized trade mission raises new questions. Is the president willing to spawn a trade war and dampen foreign investment in order to weaken a potential rival in the 2012 elections? Let us pray it is merely ineptitude at the White House.

In times gone by, the Chinese would simply respond by raising the tariff on U.S. tires. Those days are past.

Recognizing that trade wars are purely political, the Chinese have retaliated with astute political choices. The first victims are poultry producers. Tyson—a huge chicken producer and longtime Clinton financier—is about to feel abrupt pain at China’s partial exclusion of U.S. imports. If Hillary Clinton ever again condescends to step foot in Arkansas, Tyson might bend her ear on the matter.

The Midwest needs to worry, too. We produce chicken and pork. These huge exports to China represent items we just might be eager to sell to the world’s fastest-growing economy. Our largest exports to China also include electrical supply parts, aerospace parts, medical equipment and supplies. General Electric is another close friend of the Obama administration likely to feel the heat from Chinese reprisals.

No matter what you think of President Obama’s policies, his cool demeanor and earnestness command respect. The fumbling antics of protectionism do not. This is the first shot in a trade war not of necessity, but of choice.•

__________

Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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