It all comes down to supply and demand. Well, at least those are a couple factors the International Trade Commission considered when it decided not to impose tariffs on truck and bus tires imported from China.
The following three “conditions of competition” informed the commission’s analysis of whether there’s material injury, or threat of material injury, by the imported products. The quoted material below comes directly from the commission’s final report, and provides a glimipse of how the commission made its decision to keep Chinese truck tires tariff-free.
Demand conditions: Truck and bus tires are sold for two markets — original equipment manufacturers and as replacements in the aftermarket. “Demand for truck and bus tires in the OEM sector is driven by U.S. heavy truck sales, which increased between 2013 and 2015 and then declined in interim 2016. Demand for truck and bus tires in the aftermarket sector is driven by truck tonnage, which increased steadily throughout the period of investigation.” The commission said sales of both domestic-made tires and imports from countries outside of China ”were made predominantly in the aftermarket.”
U.S. producers reported an increase in demand, while importers said it was a mix of either increased or fluctuating demand. “U.S. purchasers were evenly divided between no change and decreased demand, and no purchasers reported either demand increases or fluctuations.”
Using data from questionnaires in the investigation, as well as U.S. import statistics, the commission determined the apparent U.S. consumption of truck and bus tires increased from 21.9 million tires in 2013, to 25.3 million tires in 2014, to 26.5 million tires in 2015.
Supply conditions: The domestic industry had the largest share of the U.S. market during the period of investigation, but its share “steadily declined.” Since 2013 the domestic industry’s share has dropped from 53.3% to 48% in 2014 to 45.6% in 2015. (In 2015 the four largest domestic producers of truck and bus tires were Bridgestone, Goodyear, Continental and Michelin.)
Chinese truck and bus tires were the second largest source of supply for the U.S. market during the period of investigation. Market share for Chinese tires grew from 28.7% in 2013 to 33.2% and 33.6% in the next two years.
Imports from countries other than China grew from 18% market share in 2013 to 18.7% in 2014 and 20.8% in 2015. Canada, Japan and Thailand were the largest sources of imported tires from this group.
Substitutability and other conditions: The commission found a moderate to high degree of substitutability between the domestic and imported products. Most producers, importers and purchasers agreed on that point.
Purchasers cited quality, price and availability as their key factors before buying truck and bus tires. A majority of purchasers (11 out of 20 surveyed) indicated they only sometimes purchase the lowest priced product.
Here’s one disconnect: 34 of 39 importers, and 13 of 20 purchasers said branding influences the price that customers are willing to pay for truck and bus tires. Only two of six producers indicated the same thing.
The vast majority of importers and purchasers agreed that the U.S. truck and bus tire market is divided into tiers, and most agreed there were three major tiers representing varying levels of quality, service and price.
Domestic producers said the largest share of their 2015 sales were concentrated in the top tier, while importers said the majority of imported tires from China were in the third tier, with a much smaller amount falling in Tier 2, and “very few” in the top tier.
Importers agreed that tires imported into the U.S. from countries other than China were present in roughly comparable levels in all three tiers.
“While there is some competition across tiers, purchasers seeking superior product features are generally willing to pay higher prices in order to obtain tires in higher tiers because they identify superior product features in the higher tier tires.
“In addition, certain purchasers focus in their purchase decision on certain product feature requirements such as retreadability, warranties and service time. As a result, these purchasers sometimes will only consider purchasing tires that can satisfy their particular requirements from within the top tier, in which there was substantial domestic production and very few subject imports, and do not consider purchasing tires from lower tiers, where subject imports are concentrated.”
Read more of what we found in the ITC report: