Why Tariffs on Chinese Truck Tires Are Bad: One Man's Perspective

March 1, 2016

After building up decades of tire industry street cred with a number of different tire manufacturers and marketers, J.D. "Dale" Guerrieri has decided to share his insight on the importation of truck tires with the U.S. International Trade Commission (ITC).

The tire industry consultant recently penned an informative piece about the government's investigation into truck tire imports from China. In "Tariff -- Where Are the Trucking Industry, the Teamsters Union and Warren When You Need Them?" he not only explains what is happening, but also gives, from his perspective, reasons why. He then cautions against tariffs and the domino effect they would have on the industry.

Years of experience selling imported tires from overseas makes Guerrieri's voice a strong one. Here are his thoughts, which are now an official document and part of the investigation's public record.

"The tire industry is again facing a petition placed to enact tariffs against imported tires manufactured by factories located in China. The Department of Commerce (DOC) has begun its anti-dumping (AD) and countervailing duty (CVD) investigations of imports of truck and bus tires from China. The government’s investigation of truck and bus tires was initiated by a Jan. 29 petition filed by the United Steelworkers (USW), who allege the Chinese government is unfairly promoting tire manufacturing and exports to the U.S.

"If the ITC determines there is a reasonable indication that imports of truck and bus tires from China materially injure, or threaten material injury to, the domestic truck and bus tire industry, the investigations will continue.

"Is it possible that this action is a bit of 'smoke and mirrors'? Or could it be based on clouded thinking arising from ignorance? In the trucking industry there exists the concept of 'cost per mile' as it relates to the price/cost of tires. Hence, the retreading industry comes into play. A good part of what is paid for on these subject tires is for materials and engineering that has value beyond the wearing of the original tread life. For many end users, this consideration drives the decision on what level/type of product is purchased.

"Of course, there are end users/fleets that have applications and conditions that are not conducive to the cost-per-mile consideration, e.g., fleets that have high incidences of tire theft; surface applications that cause damage to their tire investment such as rock, stone, high curbing damage, chemical exposure damage, poor air pressure and alignment maintenance, all of which have the potential to shorten casing life. Thus, we have end users who prefer to not purchase first and/or second tier tire products. And they choose the option of third tier TBR product as well as bias construction product for some applications. Most of the third tier radial truck and bus tires and all of the bias product are made outside the U.S.

"What we have here is that the subject petition is lumping together considerations which are not apples to apples. The result? Parts of the trucking industry and some Teamster Union member owners and owner-operators might get the short end of the stick if the proposed tariffs are enacted. Of course, if that happens, the increased cost ultimately will be passed on to the U.S. consumer and government agencies with trucks and buses.

"Is this petition really saying that we have to rid the U.S. of sales of Chevys because they are hurting the sales of Cadillacs? This should not be taken the wrong way, because there are Chinese truck and bus products that fare very well when it comes to cost per mile relating to original tread and casing/retread life. In fact, some compare themselves in performance capabilities to first and second tier products made in the United States, Europe, Korea, Canada and Japan.

"It is a fact that Goodyear, Michelin, Bridgestone, Yokohama, Pirelli, Hankook and Kumho all have truck and bus tire production facilities based in China producing very viable retreadable products counter to part of TRIB's (Tire Retread & Repair Information Bureau's) recent argument on Chinese tire quality used by the USW as fodder in support of their petition. Certainly, those manufacturers would not be producing subpar products to ship into other world markets to include the U.S., would they? And, where was the USW years back when Japanese and Korean made truck and bus products were profiling under the same circumstances playing out then?

"To quote Warren Buffett, "Price is what you pay; value is what you get.” And I am reminded of the words on John Wayne’s tombstone: “Tomorrow is the most important thing in life. Comes into us at midnight very clean. It’s perfect when it arrives and puts itself in our hands. It hopes we’ve learned something from yesterday.”

J.D. Guerrieri, tire industry consultant

For more information, check out these links:

"DOC Begins Investigation of Truck Tires from China."

"Truck Tire Tariff Hearing Is Set for Feb. 19."

"TRIB Backs Investigations of Chinese Imports."