US Imposes 35% Tyre Tariff, China Plays Chicken

President Barack Obama’s decision to apply a 35 per cent import duty on all passenger car and light truck tyres from China for a period of three years may have been intended to “remedy market disruption caused by a surge in [Chinese] tyre imports” into the US, but it has also provoked a sharp response from the Chinese ministry of commerce and played havoc with the share prices of Far Eastern tyre manufacturers. China’s state media said the US import duties would cost 100,000 jobs and $1 billion (£600 million).

Announcing the decision (on Friday 11 September 2009), the White House explained that the 35 per cent ad valorem levy would be placed in addition to the existing 4 per cent import duty on imports of Chinese-product passenger car and light truck tyres. The duty will reduce to 30 per cent ad valorem in the second year, and 25 per cent ad valorem the third year. The US International Trade Commission had recommended a 55 per cent tariff in the first year, 45 per cent in the second year and 35 per cent in the third year.

In response the Chinese ministry of commerce almost literally began a game of chicken, by the upping the ante with anti-dumping and anti-subsidies investigation of its own into some automobile and chicken products originally produced in the United States.” The Chinese announcement, published today (Monday 14 September 2009) follows complaints from local manufacturers that allege the above products entered the country’s markets with an “unfair competition manner”, which harmed domestic industries.

The ministry of commerce’s investigation hangs on the fact that China recently joined the World Trade Organization (WTO) and the probe alleges the US broke WTO rules and China’s laws. “China always firmly opposes protectionism. The country hoped all countries worked together to promote a quick recovery of the world economy,” the ministry of commerce said in a statement.

However, three days earlier, President Obama pre-empted China’s use of its WTO membership when he pointed out that China agreed to a special safeguard mechanism that would allow its trading partners to implement remedies in response to import surges and under other circumstances. Obama decided to take the action he did based on the “clear disruption to the US tyre industry based on the facts and the law in this case.” It will now be up to the WTO to decide who is on the right side of its rulebook.

The decision to impose the extra tyre tariffs followed a petition by the United Steelworkers union. They pointed to official US figures that show imports grew from 14.6 million tyres in 2004 to 46 million in 2008. The data shows the value of tyre imports from China increased from $453.3 millions in 2004 to $1.8 billion in 2008. China disputes the figures, saying there was a decline in the first part of 2008.

Tyres & Accessories will be watching closely for any signs of similar activity in Europe. Similarly questions now have to be raised as to where all the tyres originally produced for use in China will now end up.