Monday, October 19, 2009

OVER CAPACITY LEADS TO TRADE WAR



US govt have imposed import tariff on Chinese made tires. In the first year, the tariff will be 35%, falling to 30% in the second year and 25% in the third year. The tariff would be on top of the current 4% tariff. The tariffs will take effect in 15 days.
Before we pass out any comments we need to dig out the true reasons behind such a move when in the next two weeks before a high-profile summit of the leaders of the Group of 20 nations.
China enjoys the position of huge export of its goods in US market. In the case of tires we find that china have done an export of tires which rose from 14.6 million in 2004 to 46 million last year, accounting for about one-sixth of the U.S. market. Moreover to add fuel to the fire the volume of Export of tires made by China to US have made Four U.S. tire plants to close their production and more than 5,000 workers have lost their jobs
The rate of US unemployment has jumped to 9.7%, the highest since 1983, and employers cut another 216,000 jobs. This figure is only increasing and the real reason behind this high unemployment is only due to the exports of various countries in the US market. USA is the top export market for almost 60 trading nations worldwide.
US govt to bring stringent regulations not only regarding imports but also on outsourcing which is a major bread and butter of many economies across the World .In other words we should not get surprised with the coming steps of the US govt .A country cannot keeps its own people half feeded and feed the rest of the world. Its similar like a mother cannot feed some other child remaining its own child hungry.

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