U.S. to Impose Tariff on Chinese Tires

geochem1st

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WASHINGTON -- The Obama administration will put steep import duties of 35% in the first year on Chinese passenger and light truck tires, responding to what the U.S. International Trade Commission determined to be a surge of Chinese tire exports that has rocked the domestic U.S. tire industry and displaced thousands of jobs, U.S. Trade Representative Ron Kirk announced Friday night.
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Associated Press A Chinese worker moves large tires at an assembly line in Beijing, China, Friday, Sept. 11, 2009.

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China's government responded quickly to the announcement, saying in a statement that it "strongly opposes" what it called "a serious act of trade protectionism." China "reserves the right to make further response," the Ministry of Commerce statement said.

President Barack Obama campaigned for the presidency using tough trade rhetoric and appealing to union workers. He said he would renegotiate the North American Free Trade Agreement to incorporate stricter labor and environmental standards. And he said China must abide by the rules of the WTO or face consequences.

Since Inauguration Day, however, the president has toned down his stand. At the April G20 meeting in London and the July G8 meeting in Italy, he led leaders pledging to resist protectionism as a global recession led to rising worker anger. But administration officials have indicated they were taking a stern look at the ITC's findings of an unfair Chinese export surge in the tire market. Mr. Obama announced last night he was instructing the secretaries of commerce and labor to expedite consideration of additional tire worker assistance under the Trade Adjustment Assistance program, which offers education, retraining and other aid to workers whose lives were disrupted by trade agreements and unfair trade practices.

The case was originally brought by the United Steelworkers. Notably, the tire industry didn't join the case -- tacit recognition that it has long ago left the US market for the low-end tires at issue.

President Obama's action stands in contrast to that of his predecessor. President George W. Bush rejected four ITC recommendations for tariffs against China.

The U.S. announcement of 35% import tariffs, which would decline to 30% in the second year and 25% in the third, comes at a sensitive time. The heads of state of the 20 largest economies arrive in Pittsburgh in less than two weeks for a summit of the Group of 20, amid rising trade tensions and looming economic disputes. The United States needs China to help float a U.S. deficit expected to reach $1.56 trillion this year. Mr. Obama is also likely to seek new sanctions against Iran to combat its nuclear program, and China's vote on the United Nations Security Council is pivotal.

But administration officials said the president couldn't ignore findings that they said were violations of China's obligations under the rules of the World Trade Organization.

"The President decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," White House spokesman Robert Gibbs said in a statement.

United Steelworkers backed the Obama administration's decision to impose tariffs on Chinese tires. "The President sent the message that we expect others to live by the rules, just as we do," USW International President Leo W. Gerard said in a statement.

Vic DeIorio, Executive Vice President at GITI Tire, the largest manufacturer of tires in China, said he was "deeply disappointed" by the decision.

"By taking this unprecedented action, the Obama administration is now at odds with its own public statements about refraining from increasing tariffs above current levels," Mr. DeIorio said. "This decision will cost many more American jobs than it will create. It will also increase costs for, and take away choices from, American consumers."

The Chinese government's statement, issued by commerce ministry spokesman Yao Jian on the ministry's Web site, said the U.S. decision "not only violates WTO rules, but also runs against U.S. pledges at the G-20 summits, constitutes an abuse of trade remedy measures, and sets an extremely bad precedent in the current backdrop of a world economy in crisis." China could refer the case to the WTO, the statement said.

With its massive export sector battered by the global recession this year, China's government has repeatedly voiced concern about protectionism. Premier Wen Jiabao called attention to this issue Thursday at a speech to the World Economic Forum in Dalian, China, saying "we must be on guard against, and act to correct, all kinds of hidden protectionist activity." Critics have accused China of itself making protectionist moves, such as the government's rejection earlier this year of a bid by Coca Cola Co. to buy a Chinese juice maker.

Between 2004 and 2008, China's tire production capacity surged by 152% and is projected to jump an additional 16% by 2010. At 235.2 million tires, China's production capacity in 2008 was more than three times greater than its shipments to its home market. U.S. imports of tires from 2004 to 2008 jumped from 14.6 million to 46 million. China's share of the U.S. tire market surged 255% in that time, to 16.7% from 4.7%.

Meanwhile, four U.S. tire plants closed in 2006 and 2007. Three more are planned for closure this year. There were 5,168 fewer workers in the U.S. tire industry in 2008 than there were in 2004.

"When China came in to the WTO, the U.S. negotiated the ability to impose remedies in situations just like this one," Mr. Kirk said. "This Administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers. Enforcing trade laws is key to maintaining an open and free trading system."

Mr. Kirk said U.S. trade negotiators consulted with China and timed the release for the start of the Chinese business day. The first tariffs should take effect in 15 days. The tariffs would come on top of 4% tariffs already levied on all passenger and light-truck tires imported into the U.S. market.
Trade lawyers said the decision could invite a raft of similar petitions for temporary protection from Chinese imports. Such so-called safeguards -- meant to give U.S. industry a breather in the event of a sudden surge of Chinese products -- were negotiated as part of China's accession the World Trade Organization at the beginning of this decade. U.S. businesses won't be able to seek such safeguards after 2013.

U.S. to Impose Tariff on Chinese Tires - WSJ.com
 

geochem1st

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It's like the damn is cracked and spraying water everywhere and we just put our finger in one little hole to stop the leak.......


but something is better than nothing. When are the other industries going to be addressed?
 

SKATTERBRANE

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Who in their right mind would EVER buy a set of Chinese tires in the first place?
 

The Mick2

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sorry I cant seem to read any of SKATTERBRANE's posts there seems to be a white cotton distraction.
 

allbusinessjoe

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Tit for tat. Doesn't a Buick in China cost 2 or 3x what it costs here due to Chinese import taxes?
 
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Who in their right mind would EVER buy a set of Chinese tires in the first place?
Because that is what some people can afford.

And before you start, unlike buying guitar pickups it is generally a bad idea to wait until you can get the expensive tires you want, you have to get what your finances allow when you need them. Sometimes that means buying the Chinese ones.
 

djwilbanks

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No doubt, I had to get some cheap tires one time when some jerk gave me "Slashtire."

I tried getting some expensive reproductions of some old tires... but decided I didn't want to go into debt just to drive up and down the road.
 

geochem1st

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"The Commerce Ministry said it would look into complaints that American auto and chicken products are being dumped into the Chinese market or are benefiting from subsidies. The ministry said there are concerns the U.S. imports have "dealt a blow to domestic industries."

Last month, China said it revised its tariffs on imported auto parts after losing an appeal of a WTO ruling against its policy of requiring foreign automakers to buy more than 40 percent of the components used in any China-made vehicle from local suppliers or pay more than double the usual tariff on imported parts.
Beijing's revision was such that all imported auto parts will be taxed at the same rate regardless of the percentage of foreign-made parts used to make a vehicle.


China argued that the higher tariffs were needed to prevent automakers from evading steep vehicle import duties by importing cars in large chunks. The U.S., the 27-nation EU and Canada contended that the tariffs encouraged car parts companies to shift production to China, costing Americans, Canadians and Europeans their jobs.

China investigates US auto, chicken imports - BusinessWeek
 

GNR4EVR

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Its about time that angry American workers whove lost their jobs to China stood up for whats right. And its a small miracle that this administration elected to act. I am amazed to say the least.
 

GNR4EVR

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It's like the damn is cracked and spraying water everywhere and we just put our finger in one little hole to stop the leak.......


but something is better than nothing. When are the other industries going to be addressed?

Its just nice to see a beginning. :)
 

SKATTERBRANE

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Because that is what some people can afford.

And before you start, unlike buying guitar pickups it is generally a bad idea to wait until you can get the expensive tires you want, you have to get what your finances allow when you need them. Sometimes that means buying the Chinese ones.

I say BS, tires are too important. Forego buying ANY guitar related equipment until you put decent tires on your car! With the Chinese track record for QC and reliability, I would rather walk than risk life and limb with Chinese tires on MY car. Priorities, besides (unless your tires are slashed) you have PLENTY of warning when you will be needing new tires, time enough to save for them.

Or are you the kind of person who does not inspect his tires routinely, and waits until there is an imperitive to change them before it comes to mind?

And another thing I do not understand is people who buy two at a time, don't you rotate your tires to get maximum life out of them, so they wear evenly?

It should NEVER be a surprise you will be needing tires soon. For example, I know I will be needing them in about 9-12 months. I am saving NOW for them. And Michelins it is! (made in Canada)

The better tires are cheaper than the cheapo ones in the long run.
 

GNR4EVR

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I say BS, tires are too important. Forego buying ANY guitar related equipment until you put decent tires on your car! With the Chinese track record for QC and reliability, I would rather walk than risk life and limb with Chinese tires on MY car. Priorities, besides (unless your tires are slashed) you have PLENTY of warning when you will be needing new tires, time enough to save for them.

Or are you the kind of person who does not inspect his tires routinely, and waits until there is an imperitive to change them before it comes to mind?

And another thing I do not understand is people who buy two at a time, don't you rotate your tires to get maximum life out of them, so they wear evenly?

It should NEVER be a surprise you will be needing tires soon. For example, I know I will be needing them in about 9-12 months. I am saving NOW for them. And Michelins it is! (made in Canada)

The better tires are cheaper than the cheapo ones in the long run.

Im pretty much on board with that statement. Ive never owned nor will own cheap tires. To me, some things you just dont sacrifice. But thats just me.
 

River

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I buy expensive tires. Always have. But I see folks around here driving 70mph down highway 17 (two lanes, NO shoulder) with little kids in the car and tires with the cord showing through (I've seen their cars in the parking lots). Yeah, they're being irresponsible, but raising the price of cheap tires isn't going to help the situation. No, I have no answers, just saying.
 

geochem1st

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I buy expensive tires. Always have. But I see folks around here driving 70mph down highway 17 (two lanes, NO shoulder) with little kids in the car and tires with the cord showing through (I've seen their cars in the parking lots). Yeah, they're being irresponsible, but raising the price of cheap tires isn't going to help the situation. No, I have no answers, just saying.


I would rather see the prices go up. Less expensive products from overseas do not reflect the true cost of manufacturing a product, any product. Better QC, environmental controls, worker safety, child labor laws, consumer saftey, all add to the price of a product. Skipping these requirements will not guarantee the same quality product for less money.

The issue of poverty in our country is another debate, but I believe that if manufacturing returns to our country, we will have better paying jobs and eliminate a lot of our 'Wallmart economy' that keeps people in poor paying jobs with no benefits.
 

River

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I would rather see the prices go up. Less expensive products from overseas do not reflect the true cost of manufacturing a product, any product. Better QC, environmental controls, worker safety, child labor laws, consumer saftey, all add to the price of a product. Skipping these requirements will not guarantee the same quality product for less money.

The issue of poverty in our country is another debate, but I believe that if manufacturing returns to our country, we will have better paying jobs and eliminate a lot of our 'Wallmart economy' that keeps people in poor paying jobs with no benefits.
I agree wholeheartedly. Where we're at right now is "the pits".
 

GNR4EVR

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I think that dying philosophy of "Cheaper is better" will end up serving American workers all by itself. Living proof that some things need no sales pitch. This little wake up call is a small miracle and a small spark of hope for those who have been the victim of that ideal. Anyone who lives in Michigan will attest to just how bad it can be when your sole economy is based on the automotive industry.
 

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China-U.S. Trade War Could Have Dangerous Global Consequences - WSJ.com
:hmm:
The Obama administration's decision to impose tariffs on imports of Chinese tires Friday has been met with a swift and sharp response: China has threatened to retaliate by imposing tariffs on imports of automobiles and chicken meat from the U.S. These measures are of course symbolic and amount to political posturing for the benefit of domestic audiences. But both governments are playing with fire—unless they douse the protectionist flames quickly, they could find things spiraling out of control.

The U.S. administration has backed itself into a corner, promising to be tough on trade and using this as a bargaining chip to strengthen political support for its other domestic priorities. The U.S. may well be on firm ground by the letter of the law in seeking temporary "safeguards" protection from certain Chinese imports, a technical provision that was part of China's accession agreement to the World Trade Organization in 2001.

The problem is that these technical issues are difficult to disentangle from purely protectionist measures, especially in the public eye. Hence, symbolic measures to get tough on China mainly serve as an excuse for China to impose its own explicit protectionist measures or bring implicit measures out in the open.

The Chinese are hardly saints in this process. They have maintained a variety of subsidies and other measures to boost their exports, including an undervalued exchange rate and weak enforcement of intellectual property rights. Beijing continues to rely on export growth to generate job growth, something that their still-dominant and stultified state enterprises are not much good at. Chinese officials also continue to maintain the canard that trade with the U.S. would become more balanced if only the U.S. would lift restrictions on certain high-tech exports to China. That would barely make a dent in the bilateral or multilateral trade surpluses that the Chinese need to run to sustain their growth model.

The risk is that the actions by the two governments may be just the leading edge of more protectionist measures to come from both sides. Indeed, both the U.S. and China have already violated the much-hyped pledges to refrain from protectionist measures that they and other Group of 20 leaders have been making at their various summits. The "Buy America" provision in the U.S. fiscal stimulus bill let the Chinese put in place an explicit "Buy China" provision in their own stimulus package. The U.S. recently imposed duties on certain types of steel pipes from China, at the prodding of the steelworkers' union and a few domestic manufacturers of those pipes. All of this hardly improves the economic welfare of the average American or Chinese citizen.

Each action by either side simply invites an equal and opposite reaction, leaving everyone worse off, except for a small group of domestic producers in each country who are happy to have to face less foreign competition. But the collateral damage might be broader. An escalating trade war between these two large economies has the potential to disrupt the world trading system and set back the fragile global economic recovery that has just gotten started.

Heightened trade tensions between the two countries would also hinder progress on important multilateral initiatives where the two countries play important roles. The U.S. and China invariably set the tone for international discussions on key matters, including initiatives to control climate change, promote reform of the international financial institutions and handle rogue nations like North Korea. A dysfunctional economic relationship between these two countries could spill over into other areas and have huge costs.

The reality is that both economies need each other more than they would like to admit. The Chinese need the U.S. export market to maintain their own GDP and employment growth—a dependence that will only rise with all the new industrial capacity being built up thanks to Beijing's stimulus package. With surging public deficits, the U.S. government needs every bit of financing it can get, including Chinese purchases of U.S. government bonds.

The timing of the Obama administration's action suggests that it is intent on solidifying its domestic political base even at the risk of damaging this important relationship and fostering the perception that it is willing to gut free trade if that's what it takes to push other reforms domestically.

This is a dangerous strategy. Protectionist measures, both explicit and implicit, could be difficult to pull back once they become entrenched. The bigger risk is that the administration might have tipped the China-U.S. relationship into a more contentious and perilous phase. And all for the sake of keeping a few trade unions happy.

Mr. Prasad is a professor of trade policy at Cornell University and a senior fellow at the Brookings Institution.
 

stevef

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It's a good idea. Let's "pi$$ off" the major holders of our Treasury's debt...
Let's see how many tricks we can play before the Chinese Gov't decides to start dumping that debt.

Table is from the US Treasuy's website..
http://www.ustreas.gov/tic/mfh.txt

MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
(in billions of dollars)
HOLDINGS 1/ AT END OF PERIOD
Jun May Apr Mar Feb Jan
Country 2009 2009 2009 2009 2009 2009
------ ------ ------ ------ ------ ------ ------

China, Mainland 776.4 801.5 763.5 767.9 744.2 739.6
Japan 711.8 677.2 685.9 686.7 661.9 634.8
United Kingdom 2/ 214.0 163.8 152.8 128.2 129.1 123.9
Oil Exporters 3/ 191.0 192.9 189.5 192.0 181.7 186.6
Carib Bnkng Ctrs 4/ 189.7 194.8 204.7 213.6 189.1 176.6
Brazil 139.8 127.1 126.0 126.6 130.8 133.5
Russia 119.9 124.5 137.0 138.4 130.1 119.6
 

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