This editorial will appear in Wednesday’s print edition.
Will the Obama administration’s skirmish with China over tire tariffs flare up into a full-scale trade war? Or can neither country afford going ballistic with one of its most important trading partners – sort of a market-driven version of mutually assured destruction?
Let’s hope the second scenario is at work in the dispute between the United States and China over steeply increased U.S. tariffs on inexpensive Chinese tire imports. It’s in both countries’ interest to resolve the issue before it results in collateral damage to other industries.
China, which has officially complained about the administration’s action to the World Trade Organization, is hinting that it’s considering retaliation in the form of increased tariffs on imports of U.S. automotive products and certain chicken products.
The administration is obviously playing payback here – to labor unions that supported Barack Obama’s election. The tariffs – a 35 percent increase in 2010, 30 percent in 2011 and 25 percent in 2012 – were requested by the United Steelworkers of America, a union that represents many tire workers.
Chinese imports – which cost roughly half of American-made, name-brand tires – have been making strong inroads into the American tire market, accounting for 17 percent of domestic sales in 2008 compared to 5 percent in 2004. The Steelworkers say that the influx of cheaper Chinese tires has resulted in 5,000 U.S. job losses in the last five years. The union wants Chinese imports capped at 21 million; the United States imported 46 million from China last year.
This kind of protectionism is unwarranted. Besides hurting trade-dependent regions like the Pacific Northwest, the tire tariffs undoubtedly would raise the price consumers pay on the lower-end brands. That would hurt low-income buyers the most at a time when they need to economize wherever they can.
It’s unclear whether the tariffs would save many American jobs anyway. At least some of the domestic job losses have been attributed to U.S. workers’ greater productivity. Workers in other countries that export low-cost tires might end up benefiting more than American workers. And because the higher tariffs on Chinese tires would come off in three years, any job savings here might be only temporary.
China’s complaint to the WTO triggers a 60-day period for the two parties to try to negotiate a resolution. The administration should make every effort to use that time to avoid an escalation in hostilities.
If the rubber is going to meet the road in U.S.-China trade relations, it should be about more important issues than tires and a relatively small number of American jobs.