Obama Sets Bad Precedent With China Tariffs

Obama must go beyond talk and set an example for the world.

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Allen Cheng

Allen Cheng

President Barack Obama is coming to Beijing on Nov. 18th and 19th, his first trip to China. The visit is arguably the most important Obama will make since he took office in January.

China holds the equivalent of $2.3 trillion in foreign exchange reserves, the biggest in the world, and roughly 70 percent of its holdings are in U.S. dollars assets, much of that in U.S. Treasuries. Since China is America’s No. 1 creditor, it is incumbent upon Obama to make a good impression on the Chinese leadership. He needs to show the same magnanimity that he’s shown every other nation he’s visited so far.

Until last month, China’s leaders felt they had a good working relationship with the Obama administration. The Chinese have done their utmost to cooperate with the U.S. in coordinating the global response to the financial crisis and have continued to buy U.S. Treasuries to help finance the bailout of Wall Street and Main Street USA.

Chinese leaders, however, were taken by surprise when Obama slapped 35 percent tariffs on Chinese tire imports last September. Leaders in Beijing subsequently fought back by restricting the imports of U.S. poultry and auto parts. Although Obama has preached to other global leaders about the need to work together and not to go down the path of imposing trade barriers, his actions against Chinese tires have set a bad precedent for all.

“Chinese leaders thought Obama was a friend,” says a senior Chinese journalist who has high-level contacts in Beijing. “Now, they’re not so sure. Many are now quite cool towards Obama.” Of course, China President Hu Jintao still will give the U.S. president and First Lady Michelle a red carpet treatment and congratulate him on his recent Nobel Peace Prize. But Hu also can’t help but feel Obama is more show than substance, a politician who has charmed the world into thinking he is a statesman, rather than someone who truly is a statesman and delivers on his promises. The leaders of other nations also can’t help but feel the same way.

At a time when the U.S. needs China – and all major trading partners, as a matter of fact – on its side, it is critical that the Obama administration not cave in to lobbying interests in the U.S., and set an example for all nations by not resorting to trade barriers. The U.S. needs global markets for exports as much as the world needs U.S. consumers to regain financial health.

As the recipient of the 2009 Nobel Peace Prize, President Obama needs to be more cognizant of leading by example, and not just by giving big-idea speeches that are not backed up by promises delivered. Impressed with Obama’s idealism and charm, the entire world rushed to cooperate with the U.S. to mitigate the global financial crisis.

Most countries want to work with the U.S. to build a new global financial hierarchy that is more inclusive and not exclusive. But that spirit of cooperation cannot be one-sided, with the U.S. dictating the terms of cooperation and the rest of the world reciprocating with obeisance. That era is over.

When he visits Beijing in November, President Obama must deliver a message of fraternity to China’s leaders that sets the tone for all other major trading partners. The best thing Obama can do is set an example by withdrawing the tariffs he imposed on Chinese tires on Sept. 11 and calling upon all major U.S. trading partners to not repeat his mistake.

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