Thursday, September 24, 2009

Media Begins to Take Notice of Intensifying Trade Wars


We have been talking about a brewing trade war between the US and China since the first posting in our series On Treasury Bonds and Trade Wars back in April. After the news broke two weeks ago that the US would raise tariffs on Chinese tires, The Economist has finally started to cover this issue in an article titled Economic Vandalism.

China is not sitting idly by, however, as they have taken the US to trade court over the tire tariffs:

Beijing announced last week that it will challenge American tariffs on imported Chinese tires at the World Trade Organization.

And now a new row is potentially developing over paper tariffs:

A U.S. labor union and three paper companies have filed a new trade complaint over imports of Chinese paper, possibly fueling tensions between Washington and Beijing amid disputes over tires and other goods.

Since the financial panic that started last fall mostly ended this past spring, global trade has remained quite weak. Stock markets seem convinced that a recovery is already here but the evidence for that is still quite questionable. If global trade does not pick up steadily from here, or if a second wave of panic ensues, trade tensions will continue to build and we could move from the petty trade skirmishes of today to full blown trade wars. If and when this happens, look for the mainstream media to be two steps behind as usual.
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