By on July 22, 2010

After President Obama paid his outstanding union dues and slapped a 35 percent punitive tariff on Chinese car and light truck tires exported to the USA, we predicted two outcomes:

1.)    It will start a trade war, and China will drag the U.S.A. in front of the WTO. Sure did. The WTO accepted China’s complaint, and the trade war turned into a major conflagration.
2.)    We said that not a single new job will be created in the U.S.A., and “what the boneheaded decision does is simply shift tire production from China to other low cost producing countries.” Sure does.

The Nikkei [sub] reports that Thailand is becoming the country of choice for low cost tire production. Not a single job moved back to the U.S.A. Jobs simply move from China south to the Land of Smiles.

According to the Nikkei, Bridgestone, Sumitomo and Yokohama Rubber “are rapidly expanding their Thai factories for passenger car tires, defining the Southeast Asian nation as their key export base.” All three are ratcheting up their Thai production as if there’s no tomorrow.

Bridgestone’s Thai facility will become the group’s second-largest passenger car tire factory in the world. In the job department, Bridgestone has shut down plants in Australia and New Zealand. Sumitomo Rubber is expanding their plant in Thailand’s Rayong Province, with the aim of making the Thai factory one of the largest in the world. Yokohama Rubber plans to raise its annual production capacity in Thailand by 50 percent.  Goodyear, Michelin and other have tire plants in Thailand. Others will follow.

The financial crisis had caused global tire demand to plunge. Now, driven by red hot car sales in China and Southeast Asia, companies can’t make tires fast enough. As far as WTO rules go, there is no special safeguard clause between the U.S.A. and Thailand.

Actually, tires imported from Thailand to the U.S.A. used to be duty free. The U.S. government said “ooops” and dropped the duty free status on July 1. (While they were at it, the duty free status of wood flooring from Brazil, and gold rope necklaces from India was also eliminated, what’s fair is fair.)  The new Thai tire tariff? The 4 percent harmonized tariff allowed by the WTO. The same tariff the U.S.A. had charged on Chinese tires before the additional 35 percent were slapped on.

So where did this get us? Instead of cheap tires from China, we now get cheap tires from that epitome of political and financial stability, called Thailand.

If you associate Thailand with other uses of rubbers, it’s time to rearrange your associations. Not what you think, silly.  Burning tires is a Thai tradition when battling the police – we recycle!

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11 Comments on “Trade War Watch 15: Thai Tires Trump Chinese...”


  • avatar
    psarhjinian

    So where did this get us? Instead of cheap tires from China, we now get cheap tires from that epitome of political and financial stability, called Thailand.

    To be fair to Thailand, they’re actually fairly stable by regional standards. People wouldn’t be outsourcing to them if they were, say, Bangladesh, Sri Lanka or most of sub-Saharan Africa.

    The redshirt/yellowshirt mess was more of an exception. It’s also the kind of thing you’re likely to see more of in the developed world as we get more poor people and more demagogues willing to exploit them for political expediency

    If you associate Thailand with other uses of rubbers, it’s time to rearrange your associations.

    Booo, hisss…

    • 0 avatar
      Signal11

      To be fair to Thailand, they’re actually fairly stable by regional standards. People wouldn’t be outsourcing to them if they were, say, Bangladesh, Sri Lanka or most of sub-Saharan Africa.

      That’s a funny definition of “regional” you’re using there, if you’re including Bangladesh and Sri Lanka in Thailand’s region, psarhjinian.

      Including this last one, that’s what 10-11 coups since 1950? That’s pretty instable, even by ASEAN standards.

      That said, there’s a reason why half the readers’ computers have hard drives built in Thailand – regardless of who’s in charge, they’re not likely to nationalize foreign business assets/factories.

  • avatar
    tced2

    If the President is really serious about “protecting” tire jobs, how about a tariff on all imported tires? That would fix the problem. It would cause many other problems. Can you spell “trade war”?
    So many problems so little time for the District of Control folks.

  • avatar
    Contrarian

    In somewhat related news, Govt Motors just bought a “risky loan” (sub-prime) lender.

    What could go wrong?

    http://www.clickondetroit.com/automotive/24351262/detail.html

  • avatar
    OldandSlow

    I’d rather have an imported tire that was made at factory that is 100% owned and operated by Sumitomo or Bridgestone in Thailand than one from a joint venture factory in China – where the locals have been known to cut corners.

    • 0 avatar
      redmondjp

      Agreed. There have been serious quality issues with some of these Chinese-made tires and I won’t let my wife and kids drive in a car with them.

    • 0 avatar
      ttacfan

      I have replaced tires on two cars circa ’06 and I strongly suspect I’ve got infamously recalled Chinese stems. Starting after 18 months I was getting flats without any visible punctures on both cars. Two tires were replaced under warranty. Two more tires were damaged after they got flat. I took one of the cars to a shop 2 times to check the TPMS system which was regularly showing warnings. If Chinese tires as good as those stems, I’d stick with tires made in Akron, Ohio.

  • avatar
    probert

    I’m not quite clear on the point of this article. Is it:

    that you don’t like Obama

    You wanted more cheap chinese tires to complete your cheap tire collection

    don’t like tariffs

    Don’t like wto

    don’t like Taiwan and prefer the name “Formosa”

    Super subtle comment on currency manipulation

    Careful dipping of the toes into advocacy of worldwide livable wage policy

    one from column “A” and 1 from column “B”

  • avatar

    It’s a celebration of the fact that we could see the outcome of this little spat from a mile away… or a year away.

    And a celebration of the stupidity of country-specific tariffs in creating local jobs. Too much tax from China? There’s a whole lot of Indo-china out there…

    The only way tariffs would create local jobs is if they were applied punitively to imports from all countries. Because the entire third world has lower wages than the US.


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