Bob Ulrich

Editor

Bob Ulrich was named Modern Tire Dealer editor in August 2000. He joined the magazine in 1985 as assistant editor, and has been responsible for gathering statistical information for MTD's "Facts Issue" since 1993. He has won numerous awards for editorial and feature writing, including five gold medals from the International Automotive Media Association. Bob earned a B.A. in English literature from Ohio Northern University and has a law degree from the University of Akron.

» More

Two years from now, will Chinese tire tariffs be in effect?

By: Bob Ulrich

Web Dateline April 20, 2011 (Washington, D.C.): President Barack Obama attended ceremonies at the Capitol today celebrating the one-year anniversary of the passing of the National Health Care Act of 2010.

At union headquarters in Pittsburgh, Pa., leaders of the United Steelworkers (USW) gathered to remember the day that led to their greatest triumph. On April 20, 2009, the union petitioned the United States International Trade Commission (ITC) to put a quota on Chinese consumer tire imports.

The USW claimed that the more than 200% increase in those imports, from 14.6 million units in 2004 to more than 46 million in 2008, created a "market disruption" that led to thousands of lost jobs and six tire plant closings. The ITC thought high tariffs would provide the proper relief, and the president agreed.

So on Sept. 26, 2009, additional tariffs were imposed on Chinese consumer tire imports. The tariff was as high as 39% during year one, and is currently 34%. On Sept. 26 of this year, it will drop again, to 29%.

What is now called "China Tire Gate" strained the relationship between the two super powers. After President Obama announced the tariffs in 2009, the Chinese retaliated by putting a tariff on U.S. chickens entering the country. The U.S. immediately responded by taxing moo goo gai pan.

When Chinese restaurants from around the country starting closing, however, the president reconsidered his decision and scrapped the tax. To help bolster the restaurent sector, the government bailed out the the "Wok n' Roll" chain with stimulus monies left over from the "Bush Recession," as Press Secretary Robert Gibbs calls it.

The Chinese calmed down as tire prices in the U.S. rose. The Chinese government announced an additional credit to its tire manufacturers, which further helped offset the tariffs.

Still, consumer tire imports from China decreased, leading to a shortage of entry-level tires until the middle of 2010. During that time, consumers weren't happy, and tire dealers noted a drop in sales.

Since then, tire dealers have adapted. They started sourcing their tires from India, Brazil and Mexico, and the shortages disappeared. In addition, the entry-level tire price point dropped, which made consumers happy.

China is happier, too. Since his health care plan passed, the president has been pushing for fewer free trade restrictions with "our neighbor 6,000 miles to the west." In turn, China opened up its tire factories to unionization.

The USW responded, more than doubling its now truly international membership by unionizing the China tire industry. It was the first influx of tire industry workers into the union in many years.

In a related move, the USW has petitioned the ITC to eliminate all tariffs on Chinese consumer tire imports. Union leaders claim that the tariffs make it hard for Chinese tires to compete against U.S. imports from other low-cost countries, which has caused a "market disruption."

Related Topics: B.O.B., Chinese imports, International Trade Commission, President Obama, Tire tariffs

comments

1. Robert | September 29, 2009 at 09:58AM
   Interesting projection.
   
   Definition of DISRUPTION
   
   Unfortunately for those who live in the tire industry, Mr. Obama chose the worst of all possible options with respect to this issue.
   
   It is hard not to see the irony in this decision.
   
   The quote from press secretary Gibbs was
   
   "The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case"
   
   I would hardly describe the market prior to Mr. Obama's ruling as being "disrupted" ... but to any and all who live in the tire world what this decision did is COMPLETELY DISRUPT the tire market. Given that these duties will stay in effect as planned for the next 3 years, they will completely change the landscape in the tire business particularly in North America.
   
   I am highly doubtful that even one new manufacturing job will be created in the USA as a result, but certainly the US Public will be paying anywhere from $500 Million to as much as $750 Million PER YEAR for their tires over the next 3 years. So this ruling will in the end cost close to $2 Billion dollars out of the American consumer's pocket ... for what end?
   
   The risks of a trade war spilling over to other products both in China, USA and other Global markets has already started. We can only hope that cooler heads prevail. I for one am not confident that this will be the case, since President Obama, instead of taking the Global leadership role, merely proved that he owes his seat in the White House to the Unions to a large degree and his ruling is likely only one of many IOU's he feels obligated to repay.
   
   How unfortunate that leadership was not the overiding factor in this situation. Pork barrel politics ruled the day and the US (and the rest of the world) will be worse off as a result.