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The Truth about Trade

RSS By: Dean Kleckner, AgWeb.com

Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.

Tire Tariff Truth & Consequences

Dec 17, 2009
If you’ve tried to buy new tires recently, you may have experienced sticker shock. Did they cost more than you had expected?
 
The price of tires is going up. For this major inconvenience, we can thank the politics of protectionism--and in particular, a decision three months ago by the Obama administration to slap a punitive tariff on low-cost tires manufactured in China.
 
Now tire makers are pumping up their prices. Goodyear has announced price increases of up to 6 percent, according to Modern Tire Dealer, an industry publication.
 
Goodyear is by no means alone. Other price-inflaters include Bridgestone (5 percent), Continental (5 percent), Hancock (5 percent), Kumho (8 percent), Nexen (8 percent), Pirelli (4.5 percent), Toyo (6 percent), and Yokohama (6 percent). KeyBanc analyst Saul Ludwig told the Associated Press that he expects tire prices to rise by as much as 10 percent by January, when Americans begin a year in which they’re expected to buy more than 200 million replacement tires.
 
Would it be tiresome for me to say “I told you so”? Last summer, when the White House was merely thinking about slapping a tariff on tire imports, I warned that this action would raise the cost of driving for Americans. Back then, it was an educated guess. Today, however, the rubber has hit the road, so to speak--and we have the cold, hard proof that protectionism hits Americans in the pocketbook.
 
Common sense apparently has come to a screeching halt in Washington, D.C. The unemployment rate is already above 10 percent. Economic forecasters suspect it will stay at this elevated level for a while. So at a time when Americans are struggling financially, the federal government has enacted a policy that makes it more expensive to drive to work--or to drive around looking for work.
 
For motorists, of course, tires aren’t exactly a luxury. They’re a necessity. Some in the tire industry expect a run on supplies in the near future, on account of many struggling Americans having delayed tire purchases during the economic doldrums of 2009. Now, as people realize that they can’t put off the inevitable forever, they’re going to face even higher prices. These won’t be the result of ordinary market fluctuations, but rather the political choices of our elected officials.
 
The Obama administration has justified its 35-percent tariff by claiming that low-cost Chinese tires have led to the loss of 5,000 American jobs over the last five years. Even if this number is accurate--and I have my doubts, because its ultimate source is Big Labor--the tariff isn’t going to restore a single one of them. Overseas manufacturers are already scrambling to shift their production out of China and into other Asian countries with low-cost labor. Let’s face it: These jobs aren’t coming back to America, with or without a costly tariff.
 
But consumers will pay more for tires anyway. Tire makers are dealing with the tariff by increasing their prices across the board--so everyone will shoulder at least some of the burden, including consumers who intend to buy tires made in the United States.
 
Those who are least able to pay will suffer the most, however. Chinese imports have concentrated on one end of the tire market--i.e., the low-cost tires that Americans with limited budgets are most likely to purchase. With the new tariff, a set of tires that previously had cost $295 will sell for more than $400.
 
This tariff isn’t just about tires, either. It erodes America’s position as a global leader in the international exchange of goods and services. The next time China or any other country imposes a new tariff on an important U.S. product--one whose success is tied to the productive employment of working Americans--how are we to object? We certainly can’t occupy the moral high ground.
 
When it comes to the tire tariffs imposed by Washington, Americans may want to take inspiration from their forefathers and revive a potent phrase that now assumes a new relevance: Don’t tread on me.
 
Tim Burrack raises corn and soybeans in partnership with his brother on their NE Iowa family farm. Tim is a Board Member of Truth About Trade and Technology www.truthabouttrade.org
 
 
 
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