On September 11, the Obama administration imposed tariffs on Chinese tire imports following a recommendation from the International Trade Commission.
The United Steelworkers filed a complaint with the ITC in April, saying more than 5,000 union workers have lost jobs since 2004 as a result of Chinese tire imports.
As we reported on September 1, those lost jobs the union claims weren’t centered around Chinese tire imports, but the fact most major U.S. tire manufacturer’s had abandoned the low-end tire market, thus forcing distributors and retailers to import tires from multiple sources.
On Monday, China filed a World Trade Organization complaint over the new tariffs, stepping up pressure on Washington in the latest in a series of trade disputes.
The complaint comes on the heels of Sunday’s announcement that the Chinese government would investigate complaints that U.S. auto parts and chicken products are being dumped in China.
The Chinese complaint to the WTO in Geneva triggers a 60-day process in which the two sides are to try to resolve the dispute through negotiations. If that fails, China can request a WTO panel to investigate and rule on the case.
The Obama administration raised tariffs for three years on Chinese tires – by 35 percent in the first year, 30 percent in the second and 25 percent in the third.
Obama’s order was made, according to White House press secretary Robert Gibbs, as a means to protect U.S. trade interests.
That assertion is absurd.
Obama’s near-sighted decision was based purely on his desire to pacify the U.S. Steelworkers Union that helped get him elected. Moreover, the 5,000 jobs the union claims were lost will never be recovered, regardless of these new tariffs.
But there will be job losses, and potentially far greater than the 5,000 jobs the union claims to have lost.
In addition, trucking companies who have aligned themselves in partnership with distributors like Del Nat Tire, based in Memphis, Tennessee, are also in jeopardy of seeing substantial decreases in freight.
In a conversation I had on Monday with Ken Beil, Traffic Manager for Del Nat, the company has announced they will implement a price increase effective October 1, 2009 to offset the new tariff.
Del Nat has already indicated that on average, every tire imported from China with a 20% or higher tariff will drive up their per unit cost on all passenger and light truck tires to a point where they will no longer be competitive with other U.S. tire distributors.
Moreover, the new tariffs will disrupt long term imports and will force U.S. tire distributors to seek alternative sources for supplies. Beil also said that inventory levels will potentially be effected by January 2010.
According to Rutgers University economist Thomas J. Prusa, testifying before the ITC in April, the new tariffs have the potential to produce greater job losses and will definitely hurt consumers.
“Tariffs could cost 25,000 U.S. jobs and force consumers to spend $600 million to $700 million more a year on tires,” Pursa said.
