by: Matt Clark
In a time of increasing deficits, inflation, and spending, President Obama has taken a step to help out the the american tire industry by imposing up to a 35% tariff on tire imports from china. This is in reaction to america losing 5000 jobs in the tire manufacturing industry over the past 5 years to China. The goals of their policy are to increase production and consumption of U.S. Based tire manufacturing and in specific jobs in the steel industry. The group most benefiting from the tariff by far is the United Steelworkers Union who stand to retain thousands of paying members in an industry thats been in decline for the past two decades.
President Obama is not the first president to impose tariffs in favor of large labor unions and not the first to place tariffs on steel in favor of the United Steelworkers Union. The difference between the past and now is the current economic and financial climate here in the U.S. and the world. Because China owns a very large amount of U.S. Debt and produces such a large percent of our manufactured goods means China can really interfere with our markets if it chooses to. When we try and help the steelworkers here with a tariff, we hurt the steelworkers there, leading China to impose tariffs of there own. What will be the impact on us and our “weakened” economy if China begins to impose protectionist policies against our industries? It cannot be in out interest to influence our partners to protect themselves against us, especially in the current global climate.
See: http://www.washingtonpost.com/wp-dyn/content/article/2009/09/11/AR2009091103957.html
33 comments:
I agree with Matt, although we might be saving a couple thousand American jobs by enacting these tariffs against China, the long term effects of these types of tariffs are likely to be much more harmful than helpful for the U.S.. Being our biggest importer, China has control over almost all of our markets. Because of this it is very dangerous to start blocking them out and angering them by impossing tariffs. If angered enough, China could easily impose tariffs or taxes on their exports to the U.S. which would greatly incress the cost of almost every good we use as Americans. China clearly has more control over America's markets than we do over theirs, making it very dangerous for the U.S. to put any kind of tariffs on Chinese goods without serious consequences.
These tariffs are a quick fit to a problem that will eventually hurt everyone significantly more. Not to mention other nations imposing market tariffs, these tariffs favor an out-preformed production system as opposed to favoring the consumers who don't want to pay more than necessary for goods.
With tariffs on imports, the incentives to buy tires domestically will rise, which will help increase jobs with tire manufacturing companies. This seems like a good idea, but what will China do in reaction to this tariff? Yes, this tarriff seems like a good way to increase American jobs, but they may cause problems with our foreign affairs with China.
Hopefully the Chinese know that this should not be a big deal, and they should not make a problem out of it. If our economy fails all of the dollars they are holding will be less valuable, and we will be less likely to be able to pay off our debt.
5,000 jobs lost over several years doesn't strike me as impressive enough of a figure to warrant putting a damper on our relationship with a very powerful country that owns all our debt. I don't know much about tires, but it probably isn't an industry that requires very specific skills that are costly and lengthy to obtain. So why can't those 5,000 tire workers just go find work elsewhere? As Brett put it, if we put a tariff on goods from China, they can come right back and put a tariff on goods from the US. That could be devastating to our economy, as China looks to be increasing its demand of US products. Seems like this move was a midget tickling the bicep of a wrestler. Now what if he punches back?
I agree with Stephanie. THe tariff seems like it has good intentions on the surface, but the consequences could come to bite us in the future. China can make tires cheaper than we can. So why don't we let them? There are too many industries in the U.S. that are unable to produce products cheaper than overseas. We should focus on what we do best (steel for example) rather than trying to save industries that are sinking. This tariff started because the American auto industry tanked. Why? Because they made crappy cars. The Japanese first took the car market, and now even make better pickups than American companies. Businesses fail in a free market as time and culture change. It's not the government's job to bail them out.
While it is certainly a negative thing to lose american jobs, particularly in this current economic climate, i agree with the general sentiment of these comments and with the original post. Tariffs may save some jobs, but they are not beneficial to consumers and can upset countries that are trying to import goods to the United States. Imposing tariffs can have a reciprocal effect of causing countries to impose tariffs on us and hurt other industries. While saving jobs may be a good short term solution, it should not be a long term policy change.
I agree with Lukas, 5,000 jobs is not the reason for imposing stringent tariffs. Also, it was 5,000 jobs over five years... Our economy was thriving five years ago and the fact that tire workers were being laid off then says absolutely nothing about our current situation. The tariff also decreases over time, dropping to only 25% in two years. Clearly we are indebted to China but the tire industry is not going to precipitate an economical war, let alone phase the Chinese government. The Washington Post published this article September 12th of this year and the follow-up articles have been anything but impressive. The NY Times posted an article two days later publishing quotes from angry Chinese who were expressing their outrage on blog websites... blog websites are hardly the place to rally support for a cause. Furthermore, the US buys $4.46 worth of goods from China for every $1.00 they buy from us. Both governments are facing domestic pressure to increase economic growth in their respective countries and the tire fiasco is simply a morale booster for the general public, and especially the Steelworkers Union
Marcus Eisen
I am not sure how I feel about Obama imposing this tariff. Although I do think it would benefit some people I fore see a decrease in consumer surplus. I also believe that companies should follow the consumer demand. GM has not done this by supplying large gas guzzling SUVs. Is this really what American people want? I wish to believe that the green movement will conform businesses from the people, (people buy what they want) and it can't happen if we alter the market.
andrew sieving
Chinese tire production is mainly focused on low end tires, whereas US based tire producers focus on high end tires. This tariff will have a negligible effect on domestic tire producers because other countries, such as Mexico, can produce them cheaper than we can. All this policy is doing is hurting consumers, it won't even affect producers because labor simply isn't cheap enough in the US. I believe that Obama had to make this decision because of earlier promises made during his campaign, not because he saw any promising benefits it would create. However, it is still a bit unnerving considering he really does have a group of diverse and knowledgeable economic advisers. This was a political decision, it makes no sense from an economic standpoint.
This puts us back into the usual nasty situation:
I need new tires and I need them to be affordable.
A 35% hike on Chinese tires likely will just increase costs on all tires (as things remain competitive). The end result is that I have to pay for more expensive tires.
Kind of a bummer, but our whole society is set up on being able to afford cheap goods produced overseas. While I would like to only buy "made in U.S. goods", they tend to be really expensive (and like american cars, not all that great).
What we should have done is limit all of the free trade in the first place, now we're just paying the price of deregulation.
I feel that this tariff will not have as large of an impact as some of you suspect.
5000 jobs is a relatively small number when talking about a world economy. China will not likely retaliate, as they are reliant on the United States for their economy to be successful.
This is a publicity stunt for Obama to prove to the media that he is indeed saving American Jobs.
I agree with the general trend in all these comments: there isn't really an economic basis for this decision but a political one - and one that doesn't seem particularity useful over the long term. One new thing I will add in response to cowphunk's comment about Chinese blog postings. The complaints on those blogs may be more important than it would seem to us. The Chinese press is extremely strict so blogs and forums are the only place for most Chinese to express their problems. If there were enough blogs complaining about the tire tariff that a news-site picked them up then there might be more widespread dissatisfaction among the Chinese with the tariff than we think.
I think the obvious solution is to invest our interests in hovercars! However, for the time being we can continue our strong relations with China and since we each rely heavily on each other I do not think these tariffs will become out of control. China and the United Sates relationship is very mutualistic (right now) and it is important to keep it that way until the next big thing comes.
While I admire Obama for trying to help out workers of our country, I agree that this could definitely put a strain on our relationship with China leading them to make similar tariff's of their own. In a time where China seems to be gaining momentum and the United States seems to be loosing some. Although I do not support outsourcing in most cases, I feel it is important that we maintain good relations with China even if some of our nations workers have to be disadvantaged as a result.
This like any tariff obviously has a bad and a good side for everyone. It would most likely cause the price on all tires to raise which most people will not be happy about.
I agree with the common thread of the post. For now it can save a lot of American jobs but do we choose the American jobs over our relations with our large importers like China. I feel that it would be in our best interest to remain on good terms with China.
Meh, I value my tires, knowing money goes towards American workers make it more worthwhile to me to pay $180 a tire.
ROBERT SEADER
I don't agree. I don't think China would risk the huge income it makes here in the US. Though the steel and iron trade takes up the largest percentage of China's trade with the US (18.5% in 2008), there has been an increase in the total trade with China, (409.2 billion in '08 up from 386.7 billion in '07). Of that, the US exports only 71.5B to China. This is what I am trying to say in a nut shell: China gets way too much in revenue from trading with the US for them to worry about our protectionist policy in the long run. And, if China were to begin protectionist policy for their manufacturers, it would probably just incentivise US consumers to spend more $$ at home, which would be better for our economy.
(SOURCE: http://www.uschina.org/statistics/tradetable.html)
I don't know if it's a big threat that China will retaliate with tariffs against American imports. For one thing, don't we import a lot of things from China? Also, the things that China gets from us are higher quality products that China will have a harder time producing domestically (to the same standards). Besides, those tires we got from them probably had tons of asbestos or radioactive belts or something.
I think this tariff is a great idea, and as much as China may want to they can't really do a whole lot about it.we have a huge trade deficit with China, meaning we import way more from them than they do from us. That puts us in a position of strength when it comes to tariffs. their economy is dependent on exports, and most of their exports end up here in the US. For the most part, they just have to deal with this because their economy can't afford a damaged trade relationship with the US, and reciprocating our policies will do nothing but hurt them further.
I think this could be a positive change in the near future. With so many people struggling for money, this might get them back on the right foot. To stimulate the economy to get it back to where it once was, I think we need to get the ball rolling and then things could fall into place after.
We need to support American workers and if that means paying a few bucks more on tires then that is fine by me. If it stimulates the American economy I am in full support if it. But tariffs also impose a restraint on the free market, and that may have dire consequences for the world economy if you do not let businesses fail.
I definitely agree with you. It is ironic that in a supposed free-market society it is us who is imposing these socialist policies and not the communist Chinese.
Why should we punish China for doing a better job than us? This is a band aid fix for a much greater problem. Yes unions had a role in one day and age but it is past. They choke buisnesses and reduce out put. Further, high corperate taxes result in lower profits which result in dually lower paychecks for regular employees. Bandaid on a gunshot.
The U.S. and China's economic relations are very powerful, but I think the U.S. needs to pressure China to make more efficient and better quality goods. The tires that China sells to the U.S. are usually some of the worst tires you can buy in the market. If China were to make quality goods and create incentives for Chinese companies, I believe the U.S. will relax its tariffs on China.
We need to create different jobs available, Obama talked about creating "green collar" jobs. This would help our economy and help us rely less on China.
While I am delighted that the current administration is passing bill's that appear to be doing something helpful, I can't help but wonder at this one. Yet again, the american mindset of fix the symptom and not the cause has struck again. It's great that more american's and the united steelworkers union have more jobs, but we're still talking about tires here. That means we are still supporting one of the add on industries that is responsible for a large portion of the climate problem. So, cudo's for passing some legislation that will ensure american jobs. Not so happy that it is still in industry that is environmentally unsustainable.
While i feel that this is a useful measure, it ultimately doesn't do much. Instead of clinging to old, unsustainable industries, why aren't we paving the way for new industries or new ways of doing old problems...
Although I agree that we need to look towards the future as Witt says, we must also focus on what is important now. Cars and the need for tires are still a necessity for our country since we still rely heavily on automobiles. I also agree with President Obama because in general, we produce much better products than China does in this sector. So why not promote US jobs, and get a better quality product?
The tariff that was imposed, I believe, was one of President Obama's worst decisions while in office. Raising a tariff from 5%-35%?! That is ridiculous. Sure our workers might benefit from it, but we live in a world economy now and we MUST think about the repercussions of US policy and apply it to the world.
China, after this tariff was imposed, was quite upset, to say the least. They complained to the WTO about the tariff, and rightfully so in my opinion. Because of the tariff China had to lay off thousands of factory workers.
The way I see it, if a business is going out of business let it go. We shouldn't be imposing selfish constraints so the business stay alive. The government doesn't seem to understand that if a business is going under, it is time for them to go. New technology, and new business would be a result of letting things fail. The government needs to stop interfering in areas of life that the free market will "eventually" take care of.
The increase in the price of China's tires will encourage people to buy American tires, which would definitely help our economy in the short run. However, it's hard to say what the long run effects will be, and those could hurt the economy more than the short run effects help it.
This is a topic that I found interesting because I didn't know much about it.
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