Commercial Business Retail Wholesale Distribution

Tariff out, imports in

Order Reprints
Tariff out, imports in

OK, I admit it. I was wrong about President Barack Obama extending the 25% tariff on consumer tire imports from China.

At midnight on Sept. 26, 2012, the tariff ceased to exist. Executives from the companies with container loads of tires on the Pacific Ocean collectively breathed a sigh of relief. So did the manufacturers and marketers with tires stored in free trade zones in the United States.

I was relieved, too, even though I was surprised.  You all know I wasn’t in favor of the tariff in the first place, and I’m not now. However, it made sense to me that, given the political climate, it would continue in some form.

In his 2012 State of the Union Address and a recent presidential campaign ad, the president bragged about how placing a tariff on Chinese tire imports had saved 1,000 jobs. He had implemented the tariff, which had dropped from 35% in 2009 to 30% in 2010, to appease the United Steelworkers (USW) union. Why wouldn’t he do so again?

I believe he had the power to keep the tariff in play under legislation passed and signed into law earlier this year. The bill, H.R. 4105, gave the government broader powers when imposing duties on imports from non-market countries, like China. It amended the Tariff Act of 1930 “to apply the countervailing duty provisions of the Tariff Act of 1930 to non-market economy countries, and for other purposes.”

Although the bill was an attempt to legalize existing anti-dumping duty orders on OTR tires priced under fair market value, it applies to all merchandise “which materially injures a U.S. industry or threatens to.” That could include consumer tires.

But nothing happened as Sept. 26 came and went. Prior to the deadline, USW President Leo Gerard was quoted as saying the union would not be requesting an extension because the provision had had its intended effect. Without the need to continue it, President Obama let the tariff lapse.

In 2008, more than 46 million passenger and light truck tires made in China were exported to the U.S., too many, according to the USW. That total represented a 215% increase in units compared to 2004.

One year later, the first in a series of tariffs was put in place, with the president following World Trade Organization and U.S. Trade Act of 1974 procedures.

In 2011, China exported close to 25 million consumer tires to the U.S., a drop of 45%. Never mind that overall consumer tire exports to the U.S. increased by 1.5% over that seven-year span — tire manufacturing jobs, in the eyes of the union and the president, had been saved.

We in the tire industry know the tariffs did not result in the saving of 1,000 jobs. Pent-up demand resulted in a number of tire companies keeping or calling back workers at their plants.

Why were there so many Chinese tire imports in the first place? Because domestic tire manufacturers had stopped making low-cost radials, which made up the majority of Chinese imports.

If you don’t believe that, then answer me this: Why did domestic tire imports increase from 2008 to 2011? It’s because tire plants in the U.S. did not go back to producing low-cost radials, and there was still a significant demand for them.

If you want to believe the president, then I’m not sure the tariffs saved a net 1,000 jobs, because of the closing of Goodyear Tire & Rubber Co.’s Union City, Tenn., plant in 2011.

It’s all moot at this point, and I find myself accepting “I told you so’s” from a number of sources. Here’s what one of my industry friends sent me on Sept. 27, sung to the tune “Where Have All the Flowers Gone?” by Pete Seeger:

 Where have all the tariffs gone?

Three years passing

Where have all the tariffs gone?

Prices are dropping

Where have all the tariffs gone?

Containers are flooding in

What will we earn?

What will we earn?

I think that settles the matter. Or does it?

Through the first eight months of this year, even before the tariff disappeared, consumer tire imports from China were up 6.7% (passenger tire imports from China were up 10%). Will they climb to the record heights of 2008 again? If so, will the subsequent outcry lead to another tariff?

Maybe I wasn’t wrong, just ahead of my time.    ■

If you have questions or comments, please call me at (330) 899-2200, ext. 11, or email me at bob.ulrich@bobit.com.

For more of Bob Ulrich's editorials, see:

A plug for the tire plug?

Going global in your own backyard

Obama vs. Romney on your business

Related Articles

CMA Opens Warehouse in Houston

Alliance Will Build Third Plant in India

‘We’re in the Long Game:’ Tire Dealer of the Year Chip Wood Leads Tire Discounters Into the Future

You must login or register in order to post a comment.