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.

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The latest on Chinese tire tariffs: Might they be eliminated?

By: Bob Ulrich

On Sept. 26, 2009, a 35% tariff was added to the cost of a consumer tire imported from China. What has happened since then?

1. Chinese passenger and light truck tire imports immediately decreased. For the year, they dropped from 46 million units in 2008 to 45.3 million, a 1.5% decrease.

That, however, is a little misleading. They were down 4% through June, but because many domestic marketers, fearing President Barack Obama might impose a large tariff, brought in extra inventory during the summer months.

Through the first nine months of the year, shipments were up 6%.

2. Tire manufacturers raised prices on their consumer tires made in China. For example, Pirelli Tire North America hiked prices 10% on its P4 Four Seaons and Cinturato P5 lines, which it makes from its plant in China.

3. China reduced the import tax on natural rubber. Was this to help offset the 35% tariff? No, according to Aaron Murphy, vice president of CMA LLC.

"As part of the WTO (World Trade Organization), the Chinese government is required to make importing of materials to the mainland more competitive and attractive. The idea is to allow other countries to sell more of their goods into the Chinese market.

"While the recent natural rubber tax reduction is helpful to a tire factory, the factory has always received a portion of it back when they export tires. Reducing import taxes will just reduce the amount that the factory receives back when they export. The effect on export tire pricing in minimal at best."

4. China formally appealed the tariff decision to the WTO, which decided to look into the matter. At present, the investigation is ongoing.

Leo Gerard, International President of the United Steelworkers (USW), doesn't appear to be worried that the union's work will be undone. The USW filed the petition that eventually led to the tariff. The union claimed the domestic market was being disrupted by the massive influx of Chinese tire imports.

“The USW has complete faith that the decision of the president following the extensive investigation by the U.S. International Trade Commission will be found to be consistent with the U.S. rights under the WTO -- specifically, the special safeguard that China agreed to as part of its accession process," says Gerard, International President of the USW.

"While trading nations have the right to challenge any action of their trading partners, it is unfortunate that China has challenged a matter that flows from a provision in the protocol of accession that was critical to the U.S.’s willingness to accept China’s membership despite the long road China had -- and continues to have -- to bring its system fully into compliance with WTO requirements and norms."

5. In addition to less supply and higher prices, the tariff had another effect on the tire market in the U.S. Major brand tires gained domestic market share at the expense of low-cost radial imports in 2009, according to the Modern Tire Dealer 2010 Facts Issue.

President Obama can reconsider his decision in March. If he sticks with it, and the WTO rules in his favor, then the tariff will fall to 30% on Sept. 26, 2010. We will keep you posted.

(For background information on this issue, click on "President sets first-year tire tariffs at 35%.")

Related Topics: Chinese imports, CMA, MTD Facts Issue, President Obama, USW

comments

1. Ruben | January 19, 2010 at 06:16PM
   There are two kinds of customers,
   
   the ones that buy quality and the ones that want price.