It’s got nothing to do with rubbing. They’re called ‘the rags’ because they wear red and they’re annoying.
As per the phrase “like a red rag to a bull” a reference to a bullfighter waving a red rag at a bull to annoy it.
It seems that the historical and actual meaning of the word ‘rags’ in the context of united, is generally poorly understood and some people make some comical guesses.
One of my daughters once asked me if calling united the ‘rags’ was a reference to a ladies monthly cycle.
I was tempted to say yes but I’m a fair minded bloke so I put her right on the topic.