Tariffs Will Have Consequences

(Tire Business)

Considering the depth and breadth of testimony against higher tariffs on Chinese consumer tires, it’s surprising the Obama administration chose to raise them to the extent it did – an additional 35% in the first year, followed by 30% and then 25% in 2010-11 and 2011-12.

Predictably, the first consequence of the decision is higher wholesale tire prices, to be followed soon by higher retail prices, meaning consumers are the ones who’ll end up bearing the additional cost, as forewarned by the opponents of the tariffs.

After reviewing the arguments for and against tariffs, it seemed apparent some sort of compromise, a hybrid solution if you will, was called for that would have appeased the United Steelworkers (USW) while at the same time not risking a possible trade skirmish with China. The union sought the sanctions/tariffs in the first place and is part of the organized labor movement that played a key role in Mr. Obama’s election.

A compromise might have combined both import restrictions, which the USW sought, and tariffs, which the International Trade Commission recommended.

For instance, the administration could have allowed a certain level of imports – perhaps up to the 21 million the USW sought – to come in under the existing tariff structure (4% of value), and then start imposing tariffs on imports over that amount. More developments on this issue at Tire Business.