US President Barack Obama slapped steep additional duties on tire imports from China last Friday in a move that pleased domestic labour groups but drew a strong rebuke from Beijing and there were also prospects of China warning that it would retaliate by raising duties on US imports of poultry and motor vehicles.
The impact of the dispute extends well beyond tires, chickens and cars. Both governments are facing domestic pressure to take a tougher stand against the other on economic issues. But the trade battle increases political tensions between the two nations even as they try to work together to revive the global economy and combat mutual security threats, like the nuclear ambitions of Iran and North Korea.
Mr. Obama’s decision to impose a tariff of up to 35 percent on Chinese tires is a signal that he plans to deliver on his promise to labor unions that he would more strictly enforce trade laws, especially against China, which has become the world’s factory while the United States has lost millions of manufacturing jobs. The trade deficit with China was a record $268 billion in 2008.
The bigger risk for China, economists and corporate executives have periodically warned, is that trade frictions could cause multinationals to rethink their heavy reliance on Chinese factories in their supply chains. The Chinese targeting of autos and chickens affects two industries that may have the political muscle in the United States to dissuade the Obama administration from aggressively challenging China’s policies.
While stocks and other commodities took a hit last Friday, Gold finally managed to break decisively through $1,000/oz, hitting a session high of $1,011/oz before settling at $1,004/oz, up $9 on the day, mostly due to a weaker Greenback.
Meanwhile, a Taiwan court imposed a life sentence on former President Chen Shui-Bian after convicting him of corruption, marking a watershed in the island’s turbulent political history. Chen’s wife, Wu Su-Chen was also convicted of corruption and received the same life sentence.
This week, a sequence of Retail Sales, Industrial Production and Consumer Price Index reports from major industrialized nations are scheduled for release, and they will bring the market’s focus on consumer spending, inflation, and industrial activity in search of further signs of a worldwide economic recovery.
In the last few months the world economy has been saved from a near depression due to a range of extraordinary government stimulus measures: In the U.S. and in China, and to a lesser extent in Europe, Japan and other countries, governments have pumped liquidity, slashed policy rates, cut taxes, primed demand and ring-fenced and back-stopped the financial system. All of this has worked, but at what cost? Governments have been spending and borrowing like never before, creating an over-flooded pool of cash. Moreover, the rapid changes in the political, economic and global environment have created fundamental problems that have yet to be resolved.
On CNN news chat this morning, there were many complaints on only 12% of total eligible mortgages were modified as per the incentive package. The reason for the frustrating and slow process is that the lack of real estate sales leaves the market inventory with no real value and as such, the banks have been unable to proceed readily. After dragging on for a few months, all documents will then be outdated and will be required to be updated and resubmitted. One suggested solution is to engage a mediatory party such as credit counselor or consultant.
