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Cutting Through Tire-Tariff Flubber? Think American Rubber

September 14, 2009

You’ve probably already heard about how the U.S. will impose a controversial new 35-percent tariff on car and light-truck tires imported from China. Before they changed the topic to more important topics—like Kanye West—the talking heads on cable news sparred over whether the move will be good or bad for the economy in the end, and as they did we thought we’d bring you some straightforward information on how to make sure you’re buying American the next time you’re in the market for rubber.

Aside from looking for the simple “Made In” information on the sidewall, which most tires we looked at had, the best advice is to look at the first two digits that follow DOT on the sidewall; it has to be there by law and it corresponds to a company and the plant where the tires were made. The International Brotherhood of Boilermakers has put together a list of union-made U.S. tires and their corresponding codes.

Now if you’ve somehow missed the news in recent days, it’s worth pointing out that the tariff matter was heavily influenced by the United Steelworkers Union, an organization that represents a large portion of U.S. tire workers. The unions insist say that more U.S. tire-related jobs are in danger, and a number of U.S. companies have experienced decreased profitability due to a tire import surge from China; WTO rules (China entered in 2001) allow for action in such a situation.

The action provides a 35-percent tariff the first year, beginning September 26; 30 percent the second year; and 25 the third. That’s on top of the four-percent tariff that the U.S. already imposes. Then the statute expires completely at the end of 2013.

Chinese tire imports have trended steeply upward so far in 2009, and in 2008 China exported nearly 46 million tires (valued at $1.7 billion) from China. According to the Washington Post, Chinese tires made up 17 percent of the U.S. market in 2008, up from five percent in 2004.

American flag

American flag

China of course has called it protectionism and is looking at counter actions, possibly in the auto sector.

The unions, along with other organizations, argued that something needed to be done. From 2004 through the end of 2008, tire imports from China increased by nearly 300 percent (in terms of value) while domestic production of tires decreased by over 25 percent and about 4,400 jobs were lost in the domestic tire industry; additional shutdowns are expected to add another 2,400 losses in 2009. The domestic industry now has less than 50 percent of the U.S. tire market.

Opponents say that the decline of tire manufacturing in the U.S. is inevitable, and that the inevitable result of this tariff would be a rise in retail prices—especially at the budget end of the market. Although couldn’t find specific projections on how the tariff would affect the U.S. market, experts have told other news sources that tires could cost up to 30 percent more for the tire companies. It’s not at all clear how much of that increase would get passed along to the retail tire buyer.

"The tire manufacturers made the decision years ago to shift production of these lower-cost tires out of the U.S.,” stated Roy Littlefield, president of the Tire Industry Association (TIA), an organization that represents the tire industry, including manufacturing companies, tire service companies, retreaders, and resellers. “All this action will do is force the tire manufacturers to shift production of these lower-cost tires to other countries, such as Brazil and India.” According to the TIA, the jobs aren’t coming back.

California recycles waste tires into new roads

California recycles waste tires into new roads

The U.S. International Trade Commission (ITC) data suggests, nevertheless, that the tariff move is a positive for the economy. According to the ITC, the estimated cost to consumers will be less than $550 million, yet the benefit to the U.S. economy will total more than $1.4 billion—combining the benefits to suppliers and communities, direct benefits to tire producers, and tariff revenues. Altogether, the benefits of this move exceeded the costs by more than $884 million, according to the analysis.

“This is an important day for all American workers—especially the thousands of tire industry workers whose jobs were on the line as a result of a huge surge in Chinese tire imports that began in 2004,” said United Steelworkers president Leo Gerard, who said in a release that the decision “means China and other countries can no longer assume they can engage in predatory trade practices with impunity.”

The domestic tire industry includes ten different tire producers and 27 plants in 15 states, affecting Alabama, Arkansas, Georgia, Illinois, Indiana, Kansas, Mississippi, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, and Virginia.

With regard to the Obama administration decision: what’s done is done, and the tirade has passed. But if you want to support the local or national economy, you should consider getting some American rubber.

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