The United Steelworkers (USW) union has petitioned the International Trade Commission (ITC) for relief against passenger and light truck tire imports from China, requesting antidumping and countervailing duty relief under Sections 701 and 731 of the Trade Act of 1930.
This is a story that needs to get to the end user/consumer across the U.S. To my knowledge, it has not seen the light of day other than within our U.S. government internally and within tire industry publications. If passed, the big loser is the consumer, who can least afford it.
It appears that the few people behind this push for another round of tariffs are the union and some politicians who represent the minority of all concerned. As a whole, it appears the entire U.S. tire industry is not in favor of it as well. Common America needs to know the story and potential impact to both the people/consumers and of the potential impact on our economy.
How tariffs relate to the consumer will most likely be historic in nature. Many of us remember the tariffs that were imposed on Japanese auto makers in previous years—resulting in higher prices of autos from Japan. U.S. auto makers did not take a competitive advantage from it because of commensurate price increases taken by them as soon as those tariffs took hold.
More recently (2009-2012), the Obama administration imposed tariffs against China manufacturers of passenger, SUV and light truck (LT) tires. The non-Chinese tire producers reacted by raising prices at very high rates, the same as the domestic auto makers did during the tariffs enacted relating to Japanese auto imports into the U.S. in years past.
Here is how I think this new tire tariff proposed by the USW will play out for the consumer. The U.S. tire industry presently has an annual replacement consumption that exceeds 230 million passenger, SUV and LT tires. With the non-Chinese producer pattern established and the U.S. government clearly having no desire for regulation of the non-Chinese producers, the consumer could wind up paying approximately $40 post tariff—a conservative estimate—per tire more than pre-tariff if a new tariff is put in place. In a single year that is over $9 billion.
Let me spell that out again—more than $9 billion. We believe that consumers will not want this out of the economy or taken out of their wallets for the sake of an organized union's head count. So, now let's create/save 1,000 jobs like the last time the tire tariffs were instituted—the figure stated by a “study” about the effect of the tariffs. (I question that figure because the U.S. tire industry actually cut jobs during the last tariff).
But, if you accept the 1,000 jobs number—or you can do the math on 2,000 or 3,000 jobs, if you're very optimistic—that works out to an overall cost to the consumers/economy of around $920,000 per year per job created! Even further, the proposed period for the tariff is five years, so the cost per job is $4.6 million! Why stop at China? Let's put tariffs on all products coming in from the Pacific Rim.
And let's all start paying $1,000 for a cell phone, $5,000 for a wide screen TV, $6,000 for a laptop, etc. Would that be great for the expendable income of all U.S. citizens? And then we would have more jobs—but we would not be able to afford anything. Or worse, all the products wind up being made in the Pacific Rim anyway because that's where the emerging markets are.
And, why would consumers in those emerging markets pay for high-priced U.S.-made product with overseas freight tacked on it, as well? My overall reaction to the UAW's proposal is that the subject petition is purely politically driven.
I believe that it's bad for consumers' dispensable income and will prove to be a de-facto tax on them because they'll end up funding the tariffs' fees going to our government. It will again prove to not help protect U.S. jobs since other countries' factories—not U.S. plants—will pick up the production slack via facilities in Thailand, Indonesia, Mexico, Brazil, Taiwan, Korea, etc. The impact will be a rise in the average selling price to consumers.
Once the post-tariff pricing is raised, most of the non-Chinese product pricing will be raised to position themselves to be above the Chinese. The end result: Chinese product pricing will be back to being slotted in pre-tariff price positioning. In addition, if the Chinese government retaliates via products our corporations are marketing in China, our economy will be hurt further. Will another round of tariffs affect the business of Horizon Tire?
Yes, to some degree. It is a fact that we have Chinese-based supply sourcing via factories owned by Chinese manufacturers and located in the Pacific Rim outside of China. So, we are not locked into the status quo unlike some other Chinese product sources.
In addition, it will affect non-Chinese based companies with factories and/or factory production based in China in that they will have to shift production around. Many believe that domestic producers will not volunteer to close overseas facilities to capitalize new facilities here—that would result in wasting cash due to politics.
Here's an additional caveat and warning to consider before acting further: Where does the USW stand on medium truck tires and steel wheels coming out of China—most of which are used on tractor/trailers?
The numbers on those categories coming into the U.S. from China are high as well (check it out)! Why isn't the USW requesting tariffs on those products? Could it be that certain parties don't want to rock the boat of the major U.S. trucking companies, independent owners-operators and related unions and the trucking industry as a whole?
Why not protect U.S. factories on the truck tire side? Why only passenger and LT tires? I guess it's OK to hit the common citizen on this. But there might be too much potential backlash from the trucking industry.
And we can't upset the American trucking industry and the USW's fellow union members by causing an impact on them via higher costs since the USW needs the political support and votes from them. Lastly, most upsetting to me is that nobody is talking about all the U.S. jobs eliminated in the tire industry (and auto industry) over the years due to automation in the U.S. factories.
This is in addition to many U.S.-based factories shying away from making low-end tire products in the U.S., with some of them having tires made in Pacific Rim and Latin American countries—including China and Mexico—and shipping them into the U.S. Conversely, USW members are aware of automation in the U.S., yet I don't hear them mentioning that.
Pirelli Tire North America Inc. and Toyo Tire U.S.A. Corp. have recently established automated facilities in the U.S., with Hankook Tire America Corp., Kumho Tire U.S.A. Inc. and Giti Tire Group soon to be breaking ground on facilities—all of which will probably not be unionized nor be large employers in scale. In addition, many other overseas producers now have established facilities in the U.S. via attaining cost savings in labor, tax breaks and shipping expense.
Where are and were the Steelworkers on those activities? The Federal Trade Commission has an obligation to examine and explore all subject conditions, situations and realities. Our government has the right to protect industries and jobs in the U.S., thus allowing its citizens the availability of jobs that contribute to their well-being. But this ongoing debate about tariffs is not about jobs or the consumer.
Mostly, it's about politics—the union vote and head count preservation of the union—and resulting de-facto taxes. I am not pro-union or anti-union.
But I believe there are other avenues and activities that the USW can pursue to better serve the interest of their members and the American public. Another tariff yields no apparent benefit to the U.S. tire industry, its workers and tire product consumers. J. Dale Guerrieri Vice president of marketing Horizon Tire Corp. Houston
(Editor's note:Ed Fabrizio, vice president of sales/Southeast Division-Central Division for Horizon Tire Corp., contributed to this letter.)