Tires from China and the Tyranny of Tariffs

Looks like Boy Blunder Two is going to do it again, breaking campaign promises, endangering the economy by pandering to outraged union members, annoying the USA’s biggest creditor, and imposing yet another enormous tax on the American people who drive cars. This time the Messiah proposes to increase the tariff on tires from China from 4.7% by 35% effective 26 September, with the total tariffs decreasing to 34.7% a year later, and then 29.7% in the third year, by which time one suppose the Chinese will have done…what? Other than retaliating by reducing soaring chicken imports, one of the last commodities we have to sell, or refusing to purchase any more treasuries?

The US International Trade Commission ruled that increased imports of Chinese tires hurts American producers, meaning labor unions.  I have a sudden vision of the Chinese hurling tires at us when one can only suppose the things were ordered deliberately by those seeking lower prices. The highly punitive tariffs on all car and light truck tires entering the United States from China are seen correctly by all as a means to pander to Obama’s vital union support and garner votes for his health care aspirations, and who cares if China gets in a snit?  They are also a direct tax on US car owners, because you may be quite certain that China will not bear the costs in the long run.

“The federal trade panel recommended a 55 percent tariff in the first year, 45 percent in the second year and 35 percent in the third year. Obama settled on slightly lower penalties — an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third,” White House press secretary Robert Gibbs said. What a fascinating view of Obama arithmetic.

“Slightly” lower turns out to be on the order of a third, and the fact that the increase is, oh, call it roughly seven-fold the first year, six-fold the second year, and a mere four-fold the third year won’t have any economic impact will it? Money means nothing to those people; it’s all about making “statements.” We’ll hardly notice when the family phaeton needs new tires.

He of the impeccable logic and ethical skills had only the highest motives. “The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case,” Robert Gibbs stated. Hey, this isn’t about money, its about fulfilling the law, a rather novel notion in this day and age.

Our concern here in the far-flung Texas Whiskey Bunker isn’t the continued ineptness of the greatest politician of the age, but how it affects our decisions. Being mean-spirited, callous, and selfish, I plan to hit Sam’s tomorrow and stock up on tires, myself. Then I will consider whether or not to short the ailing tire industry, which has seen imports nearly quadruple in the last five years. One of the great lessons of WWII and depressions is that one cannot have too many tires, too much fuel, or enough butter stashed away. What do you think we were fighting over Burma for? Rubber. They had tin and other strategic materials as well, and we were cooperating with England, which wanted its colony back, of course. As a matter of trifling interest the Burma Road was one of the national lifelines for China. How quickly they forget, the ingrates!

The steelworkers union says more than 5,000 tire workers have lost jobs since 2004 as Chinese increased US market share significantly. “The U.S. trade representative’s office said four tire plants closed in 2006 and 2007 and three more are closing this year and that during that time just one new plant opened.” Uh, could this have something to do with the Kyoto Treaty and other “green” issues? If we thought we couldn’t compete from 2004 until today, just wait until we get the glory of Cap and Trade thrust upon our staggering economy.

Roy Littlefield, the Executive Vice president of the Tire Industry Association said that increasing the tariffs “would not save American jobs but only cause tire manufacturers to move production to another country with less strict environmental and safety controls, less active unions and lower costs than the United States.” The TIA opposes the tariff increase, even though they would like to sell more tires. It is an interesting argument, since the purpose of tariffs is to make foreign goods more expensive. It certainly seems to me that sales of Chinese-manufactured tires will fall because the cost of the tariff will have to be figured into the final price the customer pays, and American Tire Manufacturers would still have their share of the market plus the fall out from higher-priced Chinese imports. I think the point here is that this argument is the last thing US manufacturers have as a weapon. “Raise our taxes, raise the tariffs, and we’ll go elsewhere.”

One of these days we’ll get around to the true cause of the War Between the States, which you may infer — correctly — started over that very issue. We’re still fighting over taxes and tariffs, with the industrialized “north” wanting both high, and the Reds wanting them low.

“U.S. imports of Chinese tires more than tripled from 2004 to 2008 while China’s market share in the U.S. went from 4.7 percent of tires purchased in 2004 to 16.7 percent in 2008, the office said,” an AP report from the White House correspondent stated.

Okay, if we want to split percentages, 18.8% would be quadrupling, while 14.1% would be triple. It is all in perception, I suppose…Here’s one (a perception, that is) from Vic Delorio, another Executive Vice President, this time from the largest manufacturer of tires in China, GITI Tire (U.S.)  He opines that we really shouldn’t do this thing because it would mean Mr. Obama had broken a campaign promise! “…the Obama administration is now at odds with its own public statements about refraining from increasing tariffs above current levels.”

What does Mr. Delorio know?! He actually called it an “unprecedented action,” not true whether we view that as protectionist tariffs, catering to unions, or Mr. Obama breaking campaign promises. Most of the G-20 is against tariffs, quite possibly because they sell us more than they buy from us, but that’s okay, because the tariff won’t go into effect until the day after the meeting of the 20 in the US! Maybe they’ll all forget about it, live and let live.

Beijing says the “duties would be a violation of global free-trade principles” and has complained about U.S. protectionism, but that is understandable because their ox is endangered.

You have to love Democrats for their quick grasp of realities and their total lack of a sense of what should not be said. “Rep.. Louise M. Slaughter, D-N.Y., who chairs the House Rules Committee, said that although the 35 percent levy was less than the 55 percent recommended in July by the ITC, it was still a significant statement of administration support for organized labor,” AP reports. (Emphasis mine.)

What matters to most of us is that viciously punishing tariffs on all car and light truck tires entering the United States from China in order to placate union supporters and garner votes for the disastrous health “care” “reform” Obama wants so desperately doesn’t strike us as worth what it will cost even if we approved of his goals, which we do not.  Even though it is unlikely that there is a voter in the USA who doesn’t know that the Union vote is in Obama’s pocket, is it wise to rub our noses in the fact that our interests will be sacrificed any time it is for the benefit of the steelworkers, autoworkers, teamsters, and so forth? It adds a whole new meaning to “preserving the Union,” doesn’t it? “Car and light truck” covers what ordinary people buy. A reasonable conjecture is that BIG tires were exempted at the bequest of Jimmy Hoffa, Junior. Or do Peterbilt and Mack have that much drag in D.C.?

We’re supposed to pay a third more for Chinese tires which are, it seems reasonable to suppose, of adequate quality and less expensive, because 5,000 US tireworkers lost their jobs and several factories went out of business? Perhaps we might consider, instead, what we all know: union workers are overpaid and under-performing, business is being strangled by taxes and regulations, and it is the way of the world that if you cannot compete you lose.

They can call it “leveling the playing field” all they want, or “fulfilling the law,” but this is just another example of politics as usual. The pigs didn’t leave the trough while there was even a morsel left, and they’re still there, gobbling and flinging giant chunks of flesh to their friends on credit. They’ve run up quite a tab at the taxpayers’ diner and the world doesn’t think their IOUs are good any more.

Unemployment is at a 26-year high and consumer spending is diminishing rapidly, which means tax revenues are falling just as fast, but those tireworkers have to be protected. (Okay, “tirelessly.”) How many of them are there, do you suppose, and why should we pay much more for tires for their benefit?

In general, when the competition is nobbled prices rise. Perhaps the Chinese should seek remedy under US antitrust laws. I only buy Michelins and Perellis, but even sweet little old domestic terrorists know that competition is what keeps people from being rapacious. So rapacious. A reasonable conjecture is that we will see all tire prices increase, but hey, we can’t be selfish. Let’s spread the wealth around for tireworkers; it’s their turn. For the rest of us? “Jam yesterday and jam tomorrow,” but it will always be today for those of us who do not have the right relatives or spouses or belong to the lucrative voter blocks.

As always, there is no point in railing about things we cannot change. The One is going to go tell the Twenty that it isn’t protectionism when we do it and probably that he won, perhaps with a few insults concerning the land of the Obama and the home of the duped.

There are only two things to be done: go buy replacement tires and see if you feel like making a bet on how tire stocks are going to do. There should be a lot of tire sales in the next ten days or so.

See you at Sam’s in the Tire Department.

Regards,
Linda Brady Traynham

September 24, 2009

Aftermath: This article was written last Sunday. Monday we sent the Segundo down to buy tires, and the prices had already leapt dramatically. Tires for a small stock trailer were over $125.00 each. Do we think of it as a little “insider trading” of information amongst unions and big money? Walmart and friends in China, at least? Once again the customer learns that by the time the news is broken the market has already discounted it. Or raised the prices, in this case. — LBT