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Trading The Globe: How Far Will China Go?

The Street is awash with chatter about a potential trade war, following a White House decision to impose a steep tariff on tires imported from China.

The duties — 35 percent in the first year, 30 percent in year two, 25 percent in the third year – will take effect on September 26th and come in response to claims by the United Steelworkers that more than 5,000 Americans have lost their jobs because of tires imported from China.

Immediately Beijing lodged an official complaint with the WTO in Geneva, triggering a 60-day process in which the two sides try to resolve the dispute through negotiations. If that fails, China can request a WTO panel to investigate and rule on the case.

The conflict adds to a series of disputes over poultry, auto parts and other goods that have threatened to strain relations between the two nations.

And it comes as the two world powerhouses prepare for a global economic summit next week.

What should you expect?

Strategy Session with the Fast Money traders

I think it’s unbelievably negative for stocks, muses Guy Adami. Maybe tire makers pop for a day or two, but that’s a day trade – nothing more.

It’s not a good idea to pick a fight with China, adds Joe Terranova, especially because they’re one of the biggest buyers of our debt.

We’ve seen this administration do things I never thought we’d see, says Karen Finerman. So I can’t entirely dismiss the potential of a trade war.

Barack Obama’s bark tends to be worse than his bite, adds Pete Najarian. Personally, I’d buy pullbacks.

Other Musings

While China's quick response to Friday's tariff decision threatened to escalate the battle, many private economists said they expected both sides would find a way to avoid a full-blown trade war that would harm producers in both countries.

"The big message from China to the United States is think twice, think three times before repeating this kind of relief for a U.S. industry because if you do this again, we are going to hit you again," says Gary Hufbauer, a trade expert at the Peterson Institute, a Washington think tank.

What the President did is use a legitimate tool, explains Carlos Gutierrez, former Commerce Secretary and CNBC Contributor. So far the Chinese are reacting in the way they should react, so I wouldn’t go so far as to call this a trade war.

Both Gutierrez and economists seem to agree that both nations have too much at stake economically to allow the dispute to get out of control.

Is there any trade here?

Shares of power company AES Corp rose after a Wall Street Journal report suggested China's sovereign wealth fund was in talks to take a stake in the firm. I'd keep an eye on this stock, says Guy Adami.

*You can see our entire interview with Carlos Gutierrez at the end of the Word on the Street video.


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Trader disclosure: On Sept. 14, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns (PDE), (RIG); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (SYK), (FLIR); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (BAC) & Short (BAC) Calls; Najarian Owns (BUCY) & Short (BUCY) Calls; Najarian Owns (C) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls ; Najarian Owns (DNDN) Calls; Najarian Owns (HOLX) Calls; Terranova Owns December Gold Futures; Terranova Is Short (CCL); Terranova Works For (VRTS)

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