WASHINGTON—On Sept. 26, 2009, the Obama administration instituted three years of elevated import tariffs on passenger and light truck tires imported from China, under Section 421 of the Trade Act.
The United Steelworkers (USW) union, which petitioned the International Trade Commission (ITC) for trade relief from burgeoning Chinese tire imports, credits the tariffs with preserving more than 1,000 tire manufacturing jobs in the U.S., although these claims have been termed misleading by some independent sources.
Tire importers, distributors and retailers, on the other hand, claim the tariffs only served to reduce supply of tires to the lower end of the market and reduce jobs in the retail and distribution sectors.
There is little evidence, though, to support these claims, since imports increased from other Asian nations to fill the void left by the decreased shipments from China.
The Section 421 tariffs amounted to 39 percent in the first year, 34 percent in the second and 29 percent in the third, then reverted to the traditional rate of 4 percent on Sept. 26, 2012. Since the elevated tariffs expired, imports of consumer tires from China have skyrocketed.
Passenger tire imports from China in 2013—the first full year after the tariffs ended—exceeded 46 million units, according to U.S. Department of Commerce data, while imports of light truck tires jumped to 5.28 million units.
Both figures were all-time highs, representing a 55- and 75-percent increases in passenger and light truck tire imports over 2012, respectively.
By comparison, in its April 2009 petition to the ITC, the USW said combined passenger and light truck tire imports from China stood a slightly more than 46 million in 2008, compared with fewer than 15 million in 2004. (See chart on page 13.)
To Lawrence N. Lavigne, vice president of operations for Union, N.J.-based Foreign Tire Sales Inc. (FTS), these figures are not a surprise.
“The tariffs obviously made tires more expensive,” Mr. Lavigne told Tire Business.
“People were driving around on bald tires rather than pay higher prices. They didn't want to spend big bucks for Conti, or Michelin, or even Nexen.
“We created a damming effect,” he said. “All the Chinese tires backed up against the dam, and after that, it was just a flood.”
Although demand for new tires has stayed high, fierce competition is driving prices down, according to Mr. Lavigne. “It's a race to the bottom in tire pricing these days,” he said.
Along with several other importers of Chinese tires, FTS joined the American Coalition for Free Trade in Tires, a group formed in 2009 expressly to oppose the Section 421 tariffs.
“The coalition was never a legal entity,” Mr. Lavigne said. “But I suspect the friendships we forged would move us to come together again if we had to.”
The upsurge in Chinese tire shipments has not been lost on the USW, a union spokesman said, although he declined to discuss what the union might do in response.
The USW believes domestic manufacturers that suffer injury from import penetration should be the ones that file for trade relief, according to the spokesman.
“But if they don't do it, we take matters in our own hands,” he said. “The Section 421 case was a good example of when manufacturers have their feet in multiple countries. The Chinese are particularly retaliatory, and what they give they can take away.”
The USW “fought like hell” to keep China out of the World Trade Organization (WTO) because its policy of giving government subsidies to industry flouts WTO rules, according to the spokesman.
“We don't trust China because of the influence of the military,” he said. “It doesn't mean we don't like China, but we have to have rules we all play by.
“If we sit back and do nothing, China will take us over.”
The USW has to think long-term about how to preserve high-wage, highly skilled jobs for its members, the spokesman said.
That is why, he added, the union is at the table speaking up for its members at Doha—the capital city of the state of Qatar where the latest round of free trade negotiations among the WTO membership is taking place.
“We can't organize if we don't have any jobs,” he said.
“We have to tell the president that he can't be another Clinton and have another NAFTA (North American Free Trade Agreement).
“We have to have enforceable labor and environmental provisions.”
To reach this reporter: mmoore@ crain.com.