A Trade War Over Rubbers?

Bertel Schmitt
by Bertel Schmitt

The United Steelworkers had a big hand in putting Barack Obama in power. Now they want some payback. The United Steelworkers lodged a complaint that a flood of cheap Chinese tires had cost more than 5,000 union jobs in recent years. Obama has until Sept.17 to rule that the White House put a 55 percent tariff on tires imported from China. Which would be the end of Chinese tire imports. Tires? Steelworkers?

Well, the tires are steel-belted.

One would think that U.S. tire makers are excited about getting rid of cheap Chinese imports. Not so. “Most major U.S. tire manufacturers have tire plants in China or import from there.,” writes the Washington Post. The increasingly popular budget end of the tire market has been nearly completely moved to low-cost producing countries. The 5000 union jobs were lost, because Americans want cheap tires. The tariff would hurt American companies who import them, and American buyers who would have to pay for more expensive tires. And it’s not that Chinese tires have taken over the industry. “The value of Chinese tire exports to the U.S. totaled $1.8 billion last year,” writes the Wall Street Journal, “in a market segment worth $16 billion a year.”

American tire distributors and retailers are likewise against a trade war about tires. They “say import penalties will do more harm than good, costing jobs and forcing Americans who rely on affordable tires to continue driving on old, worn tires,” writes the WSJ.

The Chinese government is appealing to the wisdom of Obama, who shouldn’t risk a trade war over some steel belted radials. Just in case wisdom won’t prevail, China is preparing for the worst.

“The Chinese government will not turn away from issues that will harm the interests of Chinese industries. Officials from the Bureau of Fair Trade for Imports & Exports with the Ministry of Commerce said China has prepared an assortment of plans for countering different possible results from the Obama administration,” writes China Daily. One of the retaliatory options on the table: A hefty tariff on US auto imports. During the first half of the year, China imported more than $1 billion worth of automobiles from the US. About the size of Chinese tire exports. A nice tit-for-tat.

If the US slaps punitive tariffs on tires, then the Chinese will make imported Fords and Chevys so expensive that a Mercedes S-Class looks like a bargain. All the while, cheap tires will continue being imported from other countries. $5.1b of tires are already being imported from elsewhere. With the tariff on Chinese tires, it will be $6.9b from elsewhere. No new jobs in America. The UAW will be ever so grateful to their USW union brothers for losing them even more jobs. Morosity reigns. Has everybody forgotten that there are more elegant ways to stop Chinese tires?

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Derm81 Derm81 on Sep 08, 2009
    Blame customers who shop on nothing but price and the incessant pressure from Mega-Lo Mart to cut costs (and lax environmental/labor regulation in China). Excellent point and really, what is sad is that we really are in a race to the bottom. What happens when China stops or at least slows producing and manufacturing goods? Who will be the next "China" for consumers? Africa? Mars?
  • GS650G GS650G on Sep 08, 2009

    We traded paper dollars for industrial output. The Chinese sent us goods and while the quality is suspect on much of it the quality of US dollars has taken a sudden dive for the worst. They will end up with depreciated worthless dollars and we get to keep the stuff we bought. I think we might get a slightly better deal. This explains the full on panic over deficit spending here over we see in Beijing. What happens next? Well they could demand gold, the Saudis did during ww2 for oil. They could demand assets of another kind, like ownership of companies (cough GM cough) or they could try to demand payment in Euros. We might have to wash US dollars in Europe before getting that load of rubber duckies delivered over here. This is all going to hit the wall soon. We are going to find out what happens when people who have no idea where money comes from start spending too much of it. And cheap tires will be the least of our worries.

  • RHD The re-paint looks like it was done with a four-inch paintbrush. As far as VWs go, it's a rebadged Seat... which is still kind of a VW, made in Mexico from a Complete Knock-Down kit. 28 years in Mexico being driven like a flogged mule while wearing that ridiculous rear spoiler is a tough life, but it has actually survived... It's unique (to us), weird, funky (very funky), and certainly not worth over five grand plus the headaches of trying to get it across the border and registered at the local DMV.
  • Kat Laneaux I get the point that Musk is making. I wouldn't want everyone to know my secrets. If they did, they could or would shout it out to the world. But then, if Musk certified certain folks and had them sign Confidentiality agreements, which would allow them to work on cars that Musk had made, that could allow others to work on his cars and not confine vehicle owners to be charged an arm and a leg for the service. It's a catch 22. People are greedy little buggers. If they can find a way to make money, they will even if it wrong. People...sad.
  • 285exp I have been assured that EVs don’t require maintenance, so this seems pointless.
  • Slavuta "The fuel-economy numbers are solid, especially the 32 mpg on the highway"My v6 Highlander did 31 over 10 hour highway trip
  • Aja8888 As I type this, my 4 months old Equinox's Onstar module that controls the phone is broken. Yep, 4 months (never worked right from day one). Replacement will be a REFURBISHED unit since no new ones can be obtained (from China?). I really don't miss the phone via Bluetooth. And I have a great Garmin that I have used for years for trips which has free lifetime maps and traffic.