Tire tiff hurts the economy

President Barack Obama's decision Friday to impose a 35 percent tariff on imported tires from China may not be on the magnitude of the disastrous Smoot-Hawley Tariff Act of 1930 — the protectionist measure that plunged the nation into a Depression. But it will hurt the global economy, and it is just another nail in the coffin of free trade, which has been taking a beating this year.

The most immediate effect of the tariff is that car tires will cost more for American consumers, which hurts just about anyone who drives. And, as the Chinese made clear over the weekend, Americans can expect retaliation in the form of higher tariffs on U.S. exports to China. A subtle trade war already is in full swing worldwide as nations battle the economic slowdown and try to pander to the less-educated masses who demand that their jobs be protected.

Political pressures can be strong. Obama needs the support of labor unions to help with his push for health-care reform. But he also needs the cooperation of the Chinese to help in trouble spots such as Iran and North Korea, and he needs the Chinese to continue to invest in the rapidly growing U.S. debt.

In truth, protectionism protects nothing. It always leads to unemployment and even worse economic slowdowns. Already, some foreign stock exchanges traded lower Monday on fears of a possible trade war.

A new report by the Global Trade Alert, an independent trade monitoring group, said 130 protectionist measures currently are being planned by various governments. For example, Russia is considering across-the-board tariff increases. Already, 90 percent of traded goods worldwide have been affected in some way by protectionism. Meanwhile, the Wall Street Journal reported Monday that trade worldwide is forecast to shrink by 10 percent this year. When trade shrinks, prices rise and jobs disappear.

China is not without blame in all of this. The World Trade Organization last month ruled that Beijing's policy of requiring automakers to pay twice the usual tariff unless they use 40 percent or more Chinese-made components was unfair. But this week the Chinese quickly filed a complaint with the WTO against the Obama administration over the tire tariff.

All of this makes for an interesting backdrop as leaders of the world's largest economies prepare for a Group of Twenty summit in Pittsburgh at the end of this month. Ironically, this past April those leaders issued a strong and united pledge against protectionism, which they agreed would be harmful to the worldwide economy.

G-20 summits tend to be marred by protests from anti-globalization groups. These people apparently would rather see the world revert to the stone age than to allow nations to trade freely and large corporations to seek inexpensive labor and favorable tax conditions.

As the Pittsburgh meetings approach, Obama needs to decide which side in that debate he represents.