Chinese Tire Tariff Essay

898 words - 4 pages

ECON 2010
11 November 2012

Chinese tire tariff lifted
September 2009 marked the beginning of a major tariff on imported Chinese tires created by President Obama in an effort to curtail imports considered to possibly be a detriment to U.S. workers. This motion was brought to the table by a complaint filed to the Federal Trade Commission by the United Steelworkers union citing unfair trade practices by China1. The belief was that cheap, imported Chinese tires were the root cause of the loss of over a thousand U.S. jobs in tire manufacturing. Many believe that the tariff was political posturing from Obama aimed at the ever critical Ohio automotive unions. Politics aside, the economic ...view middle of the document...

Long time domestic manufacturer Goodyear Tire and Rubber is one company that has adapted to the ever changing market. O.E.M. contracts have long been their staple, but as replacement tire sales units have consistently decreased, Goodyear began its proactive movement to produce lower cost tires to regain their share of this market. Factories, such as their Union City plant, that could not show profits were closed with the molds and technology sent to other U.S. factories as well as China. Lower cost tires were produced and domestic sales of replacement units began to increase again. Goodyear is currently investing in almost $2 billion worth of domestic factories to further service the increased demand.
Examining how the tire tariff affected domestic companies like Goodyear during the last 3 years outlines its ineffectiveness and poor economic gains. The three year tariff imposed an initial 35% tax the first year, 30% the second year, and ended with a 25% tax on Chinese tires imported to the U.S. beginning in 20092. The total number of Chinese tires in the market during 2010 dropped to 31 million, down 28% from the year before. The total units shipped in the U.S. during 2010 increased to 199 million which on the surface appears to be a success for the tariff and a success for domestic manufacturers. What is often shrouded by legislators supporting the tariff is that imports from Korea, Mexico, and Canada increased an average of 31% from the prior year. U.S. distributors and manufacturers, such as Goodyear, prepared for the tariff and reacted by establishing alternative trade avenues, effectively circumventing the tariff.
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