Trade War Watch 15: Thai Tires Trump Chinese

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 t rade war turned into a major conflagration.

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!