Tire tariffs -- what on Earth is Obama thinking?

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Beats me!

Perhaps he's thinking: "Hey, there just aren't enough economic problems in the world, so let's start a trade war!"?

Perhaps he's thinking: "This will get us out of the recession -- just look how well the Smooth Hawley tariff worked for Hoover!"?

Or maybe he's thinking: "The United Steel Workers like it, so why give a **** about the rest of the world?"

Either way, mark it down to "change we can believe in, but I don't really wanna." This is really, really, really stupid.

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Type: Discussion • Score: 12 • Views: 7,450 • Replies: 70

@Thomas,

Is this where we are meant for acting surprised? Even in my half conscious state in March and other time I realized somewhere the man is out in the middle of his own solar system deranged. He bit off more than he could chew and not now knows which way to go or what to do so it's grasp at straws in the wind.

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@Thomas,

Heres on eplace that I agree with the "Let the marketplace decide". I had a set of new mark tires on my Ford Escape Hybrid. The tiures were a brand that was made in China and I got exactly 12K miles on them. Ive heard from other friends whove bought the Chinese brands that Wal mArt sells and, because the price was their first decision point, they got what they payed for also.

Now that Michelins arent made under the original QA requiremenst and construction, Michelins are also POS tires.

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@Thomas,

PS it was SMOOT , not SMooth

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This is an interesting development; mainly because I do not know very much about trade wars and the history and realities of imposing tariffs.

I'm inclined to believe, and the article states this as well, that China has much more to lose in this war than America does.

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@Thomas,

I think he is thinking that he needs the unions to pass his health care bill, and that he owes them because of their help getting him elected. Or politics as usual in other words.

I'm very opposed to the protectionism, and yes, it's protectionism even if it's a negotiated clause of China's WTC entry. Just because we negotiated the legal right to do it, doesn't mean it isn't something that violates what we preach to the whole world about free trade.

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I think that Obama may be correct here. The media is all about how this is a SOP to the American union workers, but I think that this is driven more by national defense considerations. We can not allow china to dump tires in the effort to kill of the American Tire industry. We need a lot of tires and we can not allow ourselves to fall under the domination of China for anything. They are not our friends, and never will be. On a broader scale we place ourselves at risk each time we become dependent upon the rest of the world for our basic needs, we should be moving to recover our independence on such things as energy, not allowing the problem to get worse.

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I worked in the tire business for a few months many years ago. Nearly every tire made, whether it be Goodyear, Bridgestone or any other 'American' brand, is actually made overseas. There is a country code on every tire which tells you where that tire was made. For Obama to single out China is one of the worst moves he has ever made.

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If there's a bargain to be had in tires coming from the Pacific rim it's the South Korean Kumho brand.

Best shot pricewise is TireRack.com and let WalMart mount and balance them for you. Tires from TireRack generally arrive a day or two after being ordered.

In over 60 years on this planet, I've never even knowingly seen a car tire made in China; if I was going to pick some sort of a fight with the Chinese, I'd try to come closer to having a rational cause for it than that.

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@NickFun,

The last for years of dumping has cut US capacity almost 20%, and without Obama's move it would be almost all gone in a few years.

sep 08 capacity here:
http://www.tirebusiness.com/subscriber/databook/tireprod2008showb.html?country=United+States

Quote:

Last month, the U.S. International Trade Commission (USITC) ruled in favor of a USW petition filed under Section 421 of the Trade Act of 1974. The USITC found that tariff relief was needed to urgently reduce those tire imports. Evidence showed that more than 5,100 domestic consumer tire production jobs were lost between 2004 and 2008 by the flood of Chinese tire imports that undersold producers in the United States. Domestic tire companies have announced they will close more plants and eliminate another 3,000 jobs by the end of this year.

http://www.ourfuture.org/blog-entry/2009083524/usw-tells-china-stop-treading-us-tire-makers

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this is a very important point;

Quote:

But rising nationalism is making it harder for Chinese officials to gloss over American criticism so as to preserve an unbalanced trade relationship in which the United States buys $4.46 in Chinese goods for every $1 of American goods sold to China.

trade deficit, much?

seems like a smart move to me. enough to get their attention without precipitously causing a shortage at wal-mart, who is China's 8th largest customer.

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Let us not forget that the Chinese have a history of dumping tires in the US, and that we have a history of addressing that illegal activity with tariffs. Obama is continuing a policy, not making a new one, towards continuing misbehaviour on the part of the Chinese.

Quote:

, 07.09.08, 5:06 AM ET

HONG KONG - The U.S. Commerce Department on Tuesday set final anti-dumping duties of up to 210% on millions of Chinese-made off-road tires for big trucks and other commercial/industrial vehicles. However, Chinese tire manufacturers are expected to see limited impact from the ruling amid a global shortage of such tires.

The Commerce Department found that the Chinese tires were being sold in the United States at unfairly low prices and announced final anti- dumping duties of up to 210.48%, as well as countervailing duties of up to 14%. "After a thorough investigation, the Department of Commerce has found that Chinese exporters of off-the-road tires have received government subsidies and sold at below the cost of production in the United States," said Assistant Commerce Secretary David Spooner.

http://www.forbes.com/2008/07/09/china-tires-dumping-markets-equity-cx_vk_0709markets02.html

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Sturgis wrote:

He bit off more than he could chew and not now knows which way to go or what to do so it's grasp at straws in the wind.

Interesting mix of metaphors there. Smile

And yes, I am actually surprised. I knew Obama had his weaknesses, but I never thought stupidity was one of them. Actually I still don't. Hence my question.

Farmerman wrote:

PS it was SMOOT , not SMooth

Thanks for the correction, Farmerman!

maporsche wrote:

I'm inclined to believe, and the article states this as well, that China has much more to lose in this war than America does.

Even so, a trade war would be bad enough for America. Just because it would be even worse for China, that doesn't redeem Obama's decision to risk one. Two wrongs don't make a right.

Robert Gentel wrote:

I think he is thinking that he needs the unions to pass his health care bill, and that he owes them because of their help getting him elected. Or politics as usual in other words.

I would guess it was something like that as well. Except that the unions are not in play about universal health care. They're for it, period. But maybe it's something else in this general area.

Nick Fun wrote:

For Obama to single out China is one of the worst moves he has ever made.

I agree, Nick.

DontTreadOnMe wrote:

trade deficit, much?

You say that as if trade deficits were a bad thing. What makes you think that? What specific improvements are you expecting that make Obama's move smart?

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@Thomas,

Thomas wrote:

Except that the unions are not in play about universal health care. They're for it, period.

On reflection, maybe he's about to drop the public option and buy the union's silence about it? That would be disappointing twice over.

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@Thomas,

Thomas wrote:

Thomas wrote:
Except that the unions are not in play about universal health care. They're for it, period.

On reflection, maybe he's about to drop the public option and buy the union's silence about it? That would be disappointing twice over.

...with a capital D.

I'm undecided as to whether this is a good idea. No, we don't need a trade war, but this might be an attempt at bringing things into balance. I went looking for more information and so I clicked on some links from the bottom of your article. In one:

Quote:

The International Trade Commission had already determined that Chinese tire imports were disrupting the $1.7 billion market and recommended that the president impose the new tariffs. Members of the commission, an independent government agency, voted 4-2 on June 29 to recommend that President Obama impose tariffs on Chinese tires for three years. Mr. Obama had until this coming Thursday to make a decision.

American imports of Chinese tires tripled between 2004 and 2008, and China’s share of the American market grew to 16.7 percent, from 4.7 percent, according to the United States Trade Representative. Four American tire factories closed in 2006 and 2007, and several more are set to close this year.
...

President George W. Bush received four similar recommendations from the trade commission, the most recent one involving steel pipe in December 2005, but he rejected all of those recommendations. Under the law, the president is allowed to accept or reject the commission’s recommendations.

...

Mr. Gibbs said the United States, which already imposes a 4 percent tariff on Chinese tires, would impose an additional tariff of 35 percent for one year. The tariff will be reduced to 30 percent in the second year and 25 percent in the third year. The tariff is to take effect on Sept. 26.

The trade commission proposed higher tariffs than the president actually imposed, recommending an initial levy of 55 percent.

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@FreeDuck,

FreeDuck wrote:

No, we don't need a trade war, but this might be an attempt at bringing things into balance.

But what's so desirable about "balance"? Hollywood supplies about 80-90% of all pictures running in Germany's cinemas. Evidently they're better than German studios are at making movies that Germans want to watch. Likewise, if the Chinese gain market share in tires, it's presumably because they are getting better than American producers at making tires that Americans want on their cars.

The general point here is that trade is all about division of labor between countries. It's about having every good made in the country that makes it best, rather than having every country produce every good it consumes, and do it ineficciently. Germany's movie trade deficit with America would be lousy evidence that America is harming Germany. By the same logic, America's tire trade deficit with China is no reason to think that China is harming America.

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China isn't the only country affected by American protectionist laws. Canada is in the middle of several lawsuits that could forever change how we trade with the US, as your largest trading partner... I would have thought this would have been more important than Chinese tires. If the States continue down this path they could see many of their trade lines drying up.
Canadians have already started to diversify and find new customers.
Many businesses are fed up with playing these games.

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@Thomas,

Thomas wrote:

I would guess it was something like that as well. Except that the unions are not in play about universal health care. They're for it, period. But maybe it's something else in this general area.

But they can help campaign for it. I've read of at least one of them doing so.

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@Thomas,

Thomas wrote:

FreeDuck wrote:
No, we don't need a trade war, but this might be an attempt at bringing things into balance.

What do you mean, "balance"? Hollywood supplies about 80-90% of all pictures running in Germany's cinemas. Evidently they are better than German studios at making movies that Germans want to watch.

Are they cheaper?

Quote:

Likewise, if the Chinese gain market share in tires, it's presumably because they are getting better than American producers at making tires that Americans want on their cars.

Or because they are dumping a cheaper product. What it looks like to me is that the tariff is meant to slow it down, not stop it, which is why it becomes less and less each year. I can see why you'd want to slow it down: if a cheaper but inferior product is dumped on the market and puts its competitors out of business before consumers have a chance to judge the inferior quality, then what are we left with? (Not saying they necessarily are inferior, but it's been my experience that you get what you pay for.)

Quote:

The general point here is that trade is all about division of labor between countries. It's about having every good made in the country that makes it best.

Really? What determines "best"? Best quality, best price, shortest supply chain?

Quote:

America's trade balance in one particular market is not a helpful gauge of what's good or bad for Americans.

Not saying it is. I don't know if imposing the tariff is a good idea, but other than the prospect of a negative reaction from the Chinese, I'm not certain it's necessarily bad.

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@Thomas,

Thomas wrote:

Either way, mark it down to "change we can believe in, but I don't really wanna." This is really, really, really stupid.

"Stupid" in what sense? As a matter of pure economics, or as political policy?

Not every restriction on free trade is a bad idea. After all, American companies aren't allowed to dump products on the market either -- that would be a violation of the antitrust laws. So why should a foreign company have that advantage over a domestic one?

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Tire tariffs -- what on Earth is Obama thinking?

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