The impact of the Obama Administration's first big decision on tariffslevying heavy duties on tire imports from Chinahas proved to be immediate but not as debilitating as opponents warned.
It's still early, though.
When President Obama in September ordered three years of increased tariffs on Chinese-made passenger and light truck tires shipped into the U.S., the first effect was price increases by import and private brand companies. That's what happens when the cost of tires distributed by a company goes up 35 percent.
The dutieswhich will be 30 percent in the second and 25 percent in the third year of the tariff impositionset off a scramble by private and import brand tire marketers to find alternate sources for tires. That doesn't happen over night, but ultimately you can expect most of these distributors will be supplied from other low-cost regions. Until then shortages may occur, which means higher prices.
Another predicted change that quickly occurred was Asian manufacturers' shifting production from China of tires destined for the U.S. to other countries in the region. And, as expected, the Chinese government howled. But the economic and world politics of both countries are so intertwined, no serious retaliation occurred.
The U.S. International Trade Commission and later the president ruled a huge increase in such imports had disrupted the market, costing an estimated 5,000 workers their jobs. A cynic might say the administration was repaying a debt to laborin this case the United Steelworkers (USW)for helping Mr. Obama win office. Then again, that same complaint can be made against the Bush administration, which nearly always took the opposite, pro big-business approach to foreign trade.
The USW filed its claim with the hope of keeping jobs, or even regaining some lost when production migrated to China. Won't happen.
U.S. tire plants would have to return to producing lower-value, entry-level tires to restore the lost jobs. Instead, the major tire makers are moving in the opposite direction.
The time to stop cheaper imports of auto and light-truck tires was long ago, when the major U.S. tire manufacturers were making such tires. The game has since changed. There's not enough money in affiliate and associate brands, and the Big 3 tire makers have been weaning themselves away from U.S. production of such tires. As far as the majors are concerned, the Chinese can have the market. Why do you suppose none of them participated in the tariff debate?
In the long run, private branders will just get tires from other low-cost countries, and the tariff decision will be a hollow victory for the union and its proponents.
This editorial appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.
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