The tariff tug-of-war is coming

March 12, 2015

Asking a tire dealer how business is going is something like playing the Six Degrees of Kevin Bacon game. How many questions does it take for dealers to mention the tire tariff? About as many movies as it takes to link the cast of "Seinfeld" to Bacon: two.

Modern Tire Dealer spoke to light truck tire dealers across the country for a story in our March edition. (Find that story, An economy for light truck tires, in the MTD digital edition here.) During those interviews dealers had plenty to say about how the U.S. Department of Commerce’s countervailing and anti-dumping tariffs are affecting their businesses. And one dealer, Tony Montalbano in Houston, has some advice for manufacturers.

Montalbano is the second-generation owner of Montalbano Tire & Auto Service. He doesn’t need a crystal ball to know what’s coming down the pike. He can rely on his memory.

“They’re going to take their increases,” Montalbano says of tire manufacturers, who he says view the price of Chinese tires as the floor, or entry level.

“I’m sure it’s going to happen again. I know Goodyear and Michelin, our major suppliers, our prices are going to go up,” he says.

He expects to have no choice but do what he did from 2009 to 2012 when the last tariff was in place. It will sting even more this time around though, since there’s no tariff sunset on the calendar. He’s already been unsuccessful in stockpiling tires.

“For Goodyear and Michelin, to make our numbers, we had to settle on lower margins. In order to do that we’ve had to get by with closer margins,” Montalbano says, recalling the effects of Tariff 421. “We sold tires for less than I could buy them. We’re not dealing with diamonds or furniture here. We’re dealing in tight margins.”

“It’s going to be a tug-of-war all over again,” Montalbano says.

He has some advice for tire manufacturers, though he doubts any will listen. But just in case: “If they would stick with existing prices, they’d do better. They don’t realize they could maintain (prices,) but they’re going to get greedy.”

In the St. Louis, Mo. area, Dobbs Tire has already increased its supply a bit. At this point General Sales Manager Steve Cain is more focused on supplies than prices.

“We’re more concerned with the sourcing of product,” Cain says. “We’re monitoring it closely.”

Richard Howard, a fourth-generation owner of the 79-year-old Bruce’s Tire Inc. in Oakland, Calif. and the Bay Area, is happy to be waiting for the price hike to hit. In the meantime, he’s not stockpiling extra tires to outfit the company’s six stores.

“I wouldn’t stock now,” Howard says. “The last time they imposed the tariff the manufacturers looked to alternate countries – Malaysia, Vietnam.

“Bottom line is if you pay your bill, they’re going to want to sell you tires,” Howard says.