Saturday, September 12, 2009

Punitive Tariff Update: Costs vs. Benefits

CHINA VIEW -- Obama's decision came amidst enormous pressure from the United Steelworkers and other unions, which claim that tires imported from China have cost at least 5,000 American workers their jobs. However, the stiff 35% tariff, which will ultimately raise tire prices in the U.S., could affect 100,000 tire-related jobs in America, including such sectors as imports, distribution and retail.

The biggest hit would be felt by American consumers who now buy $50 Chinese-made tires and can't afford U.S. brands that cost as much as $150, many distributors warned.

MP: In other words, we're imposing a 35% punitive tariff on ourselves, and making thousands of American consumers worse off (especially the poor and middle class), along with making thousands of Americans with tire-related jobs worse off, possibly causing job losses. Those are the inevitable, significant costs of this trade protectionism, which will far outweigh the benefits to the U.S. domestic tire industry (as economic theory and empirical evidence of protectionism clearly show). But of course there's also a huge political payoff for Obama, who has bought union support for his health care plan by imposing huge costs on American tire consumers and workers in tire-related industries.

10 Comments:

At 9/12/2009 8:30 AM, Blogger Walt G. said...

Chinese tires are not made to U.S. standards. Their e-ply tires do not hold up at the top of their load range. I had to pay extra money to buy U.S. tires for my fifth-wheel trailer, but a cost-benefit analysis using my $500 insurance deductible made them worth it. When tires blow out on trailers they take out the whole side of the trailer.

I don't have a problem with U.S. consumers saving money by purchasing imported goods, but they should have the information they need to make their choice. Some of the Chinese merchandise simply does not do what it is supposed to do. Anyone have Chinese drywall in their house? I sure hope not.

You don't have to take my word for it just Google Chinese RV tires or Chinese drywall or ask at any campground where heavy RVs go. You could also ask any builder or building supplier about drywall and what country has the safest and best items.

Informed buyers are smart buyers. It’s your money—spend it wisely.

 
At 9/12/2009 8:43 AM, Blogger save_the_rustbelt said...

The biggest problem with Chinese made tires is quality, therefore safety.

And there are plenty of tires available (I just called Wal Mart, kinda like research) at much, much less than $150.

 
At 9/12/2009 8:56 AM, Anonymous Steve said...

Quite a problem for the industry and countless industries in America that are struggling to compete with oversea importers. There's really no good solution just compromises on both sides.

 
At 9/12/2009 10:10 AM, Blogger Walt G. said...

People need to be informed about what they are buying, but I don't agree with punitive tariffs to solve quality/safety problems.

 
At 9/12/2009 10:15 AM, Anonymous Anonymous said...

It's just like the 1930s all over again. All we need now is for Obama to raise taxes and..Voila! The great depression reprise...

Maybe the Chinese will put a 35% tariff on our machinery...

 
At 9/12/2009 12:01 PM, Blogger Fishsticks said...

Maybe American consumers will now drive longer than is safe because tire, on net, are now more expensive. Remember the unseen is what will not be bought. The jobs, on the margin, that become unsustainable and maybe some lost lives from driving on tires that blew out because they should have been replaced.

If this is a good idea why on 35%? What is about 350%? Maybe an outright ban on all foreign goods that are cheaper than ours. We can have American grown oranges all year with green houses. Why would we bring them up from the southern hemisphere in the off season here?

Ask yourself who is better off after the tariff. The Chinese employee? No. The American consumer? Not so much. Trade relations with China? No. Any industries that suffer from Chinese retaliatory tariffs? No.

What about the few, relatively speaking, making tires not in china? Most certainly this is the only real winner.

 
At 9/12/2009 2:39 PM, Blogger Michael said...

I don't have any problem with free trade and the 35% tariff, like most of Obama actions is to benefit union leaders at the expenses of the American people, but there needs to be parity between the US and China. If I want to buy an 18/10 stainless steel product, American companies are required to make it out of 18/10 stainless. The Chinese are free to make it out of scrap metal, chrome plate it, stamp it 18/10 stainless, and sell it as stainless.

American Companies are at a disadvantage when they required to make a product to say standard A, but their foreign competitors only have to meet standard B but get to claim it meets standard A. Simple put, if what is on the label, isn't in the box, then the product should be banned from our shores and let the Chinese decide if their going to clean up their act.

 
At 9/12/2009 9:30 PM, Anonymous Anonymous said...

If the Chinese tires do not meet USDOT standards, they shouldn't be allowed in or sold in the US regardless of tariffs.

In general, I would prefer free trade, however sometimes free trade is not possible due to the parties and governments involved.

In cases where free trade is not possible, I'd support fair trade.

I would not at all be surprised if China retaliates.

I think this is simply Obama paying off a political debt to the steelworkers union.

 
At 9/12/2009 10:08 PM, Blogger Michael said...

I agree that imports should meet US standards or at a minimum, meet US labeling requirements. But what is "fair" trade? If a country can't make 18/10 stainless, should they be allowed to sell their best attempt at 18/10 as 18/10 in the US?

 
At 9/14/2009 4:00 AM, Blogger randian said...

If a country can't make 18/10 stainless, should they be allowed to sell their best attempt at 18/10 as 18/10 in the US?

Obviously not. That's fraud. Fraud, however, has nothing to do with free trade. Retailers have a choice: get sued for fraud, stop selling the product entirely, or forcing their suppliers (in this case, Chinese ones) to make stuff that's up to snuff. None of these things require tariffs to accomplish.

 

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