Magazine for the professional tire industry
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MTD August 2016 Tire tariffs: an analysis rough May of this year, U.S. production of tires was up 3% from a year ago, but total shipments from abroad were running a lile higher. "It is usually the case that by the time we impose the tariffs, the penetration of the imports into our market is so great that it's too late to reverse what has become a fundamental shi in competitiveness," said Clyde Prestowitz, an Asia economy expert and former top trade negotiator in the Reagan administration. In addition, Prestowitz said that such duties can be rendered ineffective by a corresponding devaluation in the currency of the exporting country, something that frequently has been alleged by critics of Chinese trade practices. In trade annals, people have oen held up the taxes on imported Japanese motorcycles in the early 1980s as a paragon of a suc- cessful tariff. It's been said that the initial 45% duties levied in 1983, and set to last five years, were so effective that it allowed Harley-Davidson to recover so fast that it did not even want the tariff in the fih year. But Irwin, the Dartmouth economics professor, writes that the "real story is different: import relief had nothing to do with Harley-Davidson's turnaround." Instead, Irwin says, the motorcycle company recovered thanks to a new management team as well as the rebounding economy. Harley's sales had suffered during the double-dip recessions of the early 1980s, which clobbered manufacturing and blue-collar workers, its core customers. As for the tariffs and related quotas, Irwin writes in his book, "Free Trade Under Fire," they had relatively lile effect on the company. e duties were on imports of motorcycles with 700 cc engines or larger, but Suzuki and Yamaha evaded the measures by producing a 699 cc version. What's more, Honda and Kawasaki already were producing heavyweight motorcycles in the U.S. "But even if protection contributes lile to adjustment," he said, "the escape clause [tariff ] has been a political necessity and has helped maintain domestic support for the open world-trading system." Supporters of tariffs also point to benefits. Tariffs and quotas have encouraged foreign companies to put manufac- turing facilities on American soil. ey pushed, for example, Japanese carmakers to establish production operations in the U.S. starting in the 1980s. As Prestowitz observed, "e import restraints didn't prevent Detroit from losing market share, but they did shi jobs and the value added [on goods] from Japan to America." e growing market share of imported tires — and perhaps the threat of tariffs — also are factors behind the recent rise of new tire factories in the U.S. In May, South Korean firm Kumho Tire officially opened a $450 million plant in Macon, Ga., creating about 400 jobs. Still, William Reinsch, a trade expert at the Stimson Center, a Washington, D.C.-based think tank, said that while tariffs have helped some companies, "sadly, there aren't a lot of examples" of success. ey are blunt instruments that can result in supply disruptions, higher prices and, at worst, retaliation by the country hit with the duties, he said. "ere is a search for new tools." Copyright© 2016. Los Angeles Times. Reprinted with permission. Quik-Link: 800-687-1557 ext. 19117 36