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The Obama administration has announced that it is imposing tariffs on Chinese tire imports. The three-year plan will be have 35% tariffs the first year, 30% tariffs the second year, and 25% tariffs the third year.
This is good news for U.S. tire manufacturers and bad news for Chinese tire makers. American consumers will pay more for tires over the next three years than they would if they could buy cheap Chinese tires, but it will be a benefit for U.S. big labor and domestic tire makers as their products will be more competitive.
The Chinese are calling the move protectionist. The International Trade Commission ruled that Chinese tires were hurting the domestic tire producers and has insisted that under the trade agreements it could impose tariffs.
It's interesting to note that Obama chose to release the tariff information late Friday, the time administrations usually release news they want forgotten over the weekend. Obama reduced the protective tariffs from the levels recommend by the federal trade panel. The panel recommended 55%, 45%, and 35% tariffs.
Free trade, protectionism, and taxes have been hot issues for many years, even prior to the Boston Tea Party. The Steelworkers Union claims that more than 5,000 U.S. tire jobs have been lost since 2004, and market share has risen from 4.7 % to 16.7% in that time. These tariffs only affect tires made in China, so tire manufacturing can still shift to other foreign countries.
The stakes could be much higher than just tire prices, as this action could also start a trade war. Some economists believe U.S. protectionist trade policies changes after the crash of 1929 prolonged the Great Depression.
Goodyear (NYSE: GT) and Cooper (NYSE: CTB) are two public U.S. tire manufactures that could benefit.
Kevin Kersten is a financial analyst and writer.
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Reader Comments (Page 1 of 1)
9-13-2009 @ 5:35PM
Sick Of It said...
Why just tires? MANY industries have been brought to their kness by cheap chinese or mexican imports.
9-13-2009 @ 5:58PM
Jabo said...
Why? Because the tire industry in the US is union and Obama has to pay back for their support. They contributed millions to his theft of the presidency and he is returning the favor.
9-13-2009 @ 6:50PM
ij70 said...
I believe that comparing trade situation today to trade situation in 1929 is a big mistake.
China has been competing unfairly for some time now. Some tariffs are needed, there is no question about that. However, I wish to caution others, we do not need nor want to kill trade with China.
9-13-2009 @ 9:09PM
mkarlleeds said...
What Mr. Obama and all of our elected officials need to concern themselves with is bringing back jobs to the USA and moving the economy forward.
The best possible way to do this is to establish laws that would require that anything sold in this country have a set percentage of it manufactured here. Not manufactured in Mexico and assembled in San Diego, but require that the components be made here.
Yes, this is protectionist, but it guarantees jobs, puts Americans back to work and helps build a tax base for the nation.
By caving in to countries like China who complain about our policies, whose interests are our elected officials looking out for? We need to show the world that we have a backbone and need to begin to look out for number 1.
Another thought is that by manufacturing here, we have better control of what is produced here. Do we really need to be buying products from China where the baby formula and dry wall is contaminated? I was shocked recently when we were food shopping and saw apple juice made in China being sold in the supermarket. Have we lost the ability to produce this stuff?
Truly something our elected officials need to consider. If they won't may be Americans need to boycott Chinese or non-American products!
9-13-2009 @ 11:47PM
martialoffrance said...
Good now kill NAFTA. Hope this step leads to more measures to help my fellow countrymen and bring jobs back to the USA!
9-14-2009 @ 6:04AM
keyjoe21 said...
NAFTA SUCKS, Free trade for whom? The tariff's should have been started many years ago. In the mid 1990's all the tiny sweat shops that made cheap t-shirts in PA had to close because they could not compete with China's cheap labor! And our US workers where only making minumum wage at the time
It's not just tires, it's everything we buy, and I ask you how many American products are you going to see in China, Mexico, Japan and all the other countries?
All these foreign countries are only interested in our grain, timber and land, wake up America!
9-14-2009 @ 5:59AM
Dan Barnett said...
It's totally off-topic but I'd really like to see some evidence that President Obama stole the election. The vote tally figures I saw were fairly overwhelming. It's not like we're talking 2000 here.
12-12-2009 @ 10:01AM
lars medhaug said...
Toyo now has a plant in china,I boight a set of toyo tires expecting japanese qualityandles schwaub pu 2 cjinese and two japanese tires on .they bounced and shook ao i finaly took them to schwab dealer and said if they were chinese i wanted them off,he checked and assured me the were not and rebalanced them in short i drove them f23k miles one had a crooked tread and one had a built in bounce .i recieved static from the les schwab dealer and i finally went to wallmart and put american tires on and they discarded the toyo tires for me.NO MOTRE SCHWAB AND NORE TOYO TIRES ONLY MADE IN USA FROM NOW ON