Magazine for the professional tire industry
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MTD August 2016 Limited success of Chinese tire tariffs shows why Donald Trump's trade prescription may not work Editor's note: e following unedited story, including the headline, appeared in the July 24, 2016, Los Angeles Times. It complements the coverage we at Modern Tire Dealer have published since stringent tariffs were first imposed on imported consumer tires om China in 2009. e issue is ont and center again as the U.S. Department of Commerce considers tariffs on truck and bus tires om China, as well as off-the-road tires om India and Sri Lanka. All the while, Republican presidential nominee Donald Trump says tariffs are the answer. — Bob Ulrich By Don Lee A key plank in Donald Trump's economic platform is to get tough on trade, especially with imported Chinese goods, which the Republican presidential nominee wants to slap with a 45% tariff. Economists of all stripes have denounced the proposal as tinder for a trade war that would be devastating for the U.S. and global economies. But there is another reason why such punitive measures are a bad idea: ey just haven't worked very well. Over the past 35 years, the U.S. has imposed duties and import quotas on foreign-made electronics, socks, steel, cars and solar panels, among many other goods. Sometimes such tariffs have brought relief for a particular domestic industry, but more oen, they have had lile lasting effect in boosting production and employment at home because the duties came too late, were circumvented or were made largely irrelevant as imports shied to other foreign countries. That hasn't stopped the U.S. from trying. The Obama administration has filed numerous unfair trade cases and won several tariff judgments against China in recent years. Analysts predict more enforcement activities down the pike, given the anti-trade rhetoric in the presidential campaigns and the public's increasing disenchantment with globalization. "I do think we're seing ourselves up for more tariffs and tougher action; it's almost inevitable," said Derek Scissors, a China-U.S. economics analyst at the American Enterprise Institute. Trump has been unrelenting in bashing China for the loss of American economic strength and manufacturing jobs in particular. In 2015, China overtook Canada as the United States' top trading partner, a year in which the American trade deficit in goods with China reached a record $366 billion. In his nomination acceptance speech ursday ( July 21, 2016), Trump called China's 2001 entrance into the World Trade Organization a "colossal" mistake for the U.S. because it enhanced the Asian giant's trading capabilities. And he pledged to halt China's "outrageous the of intellectual property, along with their illegal product dumping, and their devastating currency manipulation." But it won't be as simple and straightforward as Trump suggests. e U.S. president cannot unilaterally levy a 45% tax on imported goods. Under existing U.S. law, he or she would be able to impose a tariff of up to 15% on products from another country for 150 days, said Douglas Irwin, a trade expert at Dartmouth College. Congress could take tougher action through legislation. And the third way that tariffs could be levied on specific items is aer a labor union or industry files a complaint with the U.S. International Trade Commission of unfair pric- ing or government subsidies. e agency could recommend special safeguard duties to the president, who must sign off on these relief measures. One illustrative case is Chinese tires. In September 2009, Obama, in response to a union com- plaint, approved safeguard tariffs of 25% to 35% on imported Chinese car and light-truck tires for three years. It seemed to work at first blush. Total Chinese imports of new radial tires for cars dropped 28% in 2010 from the prior year, to $899 million. But other trading partners rushed to fill the void. Shipments from South Korea, ailand and Indonesia doubled in value, more than offseing the decline in Chinese-made tires. U.S. production of tires increased aer 2009, as was hoped. e number of car and light-truck tires made in the U.S. rose nearly 14% in 2010, reversing several years of decline, according to the Rubber Manufacturers Association. But the count of imported feature "I do think we're setting ourselves up for more tariffs and tougher action; it's almost inevitable," said Derek Scissors. 32