Tire Case Study

1640 Words 7 Pages
While trade barriers have reached historically low levels, an increasing number of countries are concerned about job losses as a result of the trade liberalization. An issue is well represented in the recent U.S trade policy agenda. This report will focus on the case study regarding the American imposed tariffs on tire imports from China.
In September 2009, Obama issued a three year tariff on tire imports from China in the amount of 35% in the first year, 30% in the second year and 25% in the third year, with each year on top a general 4% import tax. China interpreted this as a serious case of protectionism. First of all, it will review the data on the US and Chinese Tire markets. It will explore the adverse consequences arisen from the issue
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Chinese tires are cheaper due to lower quality inputs and cheap labour, making the tires more appealing for American consumers. In just 4 years the Chinese market share of the American tire market has experienced a considerable increase from 5 per cent to nearly 17 per cent. US tire production fell from 218m to 160m between 2004 and 2008. The fall in productivity forced tire companies to make many of their employees redudant as over 5000 workers in the industry lost their job. Consequently there were protests from the United Steelworkers union which consists of 15,000 workers from 13 tire plants. These events encouraged President Barack Obama to issue a three year tariff on Chinese tire imports in September 2009. The three year tariff scheme was in the amount of 35% in the first year, 30% in the second year and 25% in the third year, with each year on top of a general 4% import tax (Hill, 2014). China objected, calling it a serious case of protectionism and stated that the higher tariffs are inconsistent with Article I:1 of the GATT 1994 (WTO, 2011). China argued that tariffs would cost its tire industry $1bn and cause 100,000 Chinese redundancies (BBC, 2010). However, China’s appeal was not successful and the tariffs remained. China responded by putting tariffs on US imports such as broiler …show more content…
consumer tire imports from China, the United Steelworkers union (USW) filed a complaint to the U.S. Department of Commerce (USDOC) and the U.S. International Trade Commission (USITC) against the Chinese government. Gerrard, the USW International President stated that certain tires from China had been dumped and subsidised and that “China is cheating and it’s costing us jobs” (PR Newswire, 2015). The United Steelworkers union asked for countervailing and anti-dumping duties to be implemented on Chinese tires once again as they argued that the Chinese government had subsidised tire exports to the U.S (United Steelworkers, 2015). The USDOC supported the United Steelworkers claims and consequently they have released tariff rates for Chinese tire imports. The antidumping margins on imports from China range from 14.35% to 87.99% whereas countervailing duties range from 20.73% to 100.77%. These duties were approved on July 2015 when the International Trade Commission voted 3-3 to find evidence of material injury to the US tire industry due to artificially low Chinese imports (Tire Business,

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