To Trade or Not to Trade?

This article in the New York Times gives a brief overview of the new tariffs on tire imports imposed by the United States on China. The Chinese reaction was quick and direct in political speak. The Chinese threaten to increase tariffs on chicken meat and automotive parts.

The dollar amounts of the exports are similar, $1.3 billion for tires from China to the United States, and a total of $1.176 billion for automotive parts and chicken meat from the United States to China.

The Obama administration is selling this as more strictly enforcing trade laws. China is using a similar political move by threatening to investigate possible subsidies of tires and chicken meat which would open the door for higher tariffs.

These two economic giants rely on each other for exports. Their economies are also intertwined. China buys up Treasury bonds and other dollar assets causing the Yen to be able to be held down allowing the Chinese goods to be inexpensive in foreign markets.

The impact this could have on our economy could be far reaching if China decides to start enforce all trade laws or slow down their investment in our economy, causing our already slowly recovering economy to stall or even back slide. This will definitely be a talking point during the president's visit to Beijing in November.