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"We've brought trade cases against China at nearly twice the rate as the last administration – and it’s made a difference. Over a thousand Americans are working today because we stopped a surge in Chinese tires."-- President Barack Obama, State of the Union Address, Jan. 24, 2012.
For an America unemployed, China is as good a scapegoat as Goldman Sachs. On Tuesday, President Barack Obama said that a two year old trade tariff on automobile tires Made in China led to over a thousand jobs in the U.S. tire business. It did create some jobs, but not much. In 2010, roughly 51,600 people were employed by tire manufacturers, rising to 51,700 in 2011, according to the U.S. Bureau of Labor Statistics. However, the number has declined by the thousands since the tougher trade policy was enacted. In 2009, 55,000 people were employed in the industry on average throughout that year, according to the Bureau of Labor Statistics. The industry has been shedding U.S. workers for more than a decade, dropping from a high of 86,800 back in 2000. Making tires overseas is just cheaper for the big brands, and they have been moving production in that direction for a long time.
The tariffs did ultimately lead to a 30% reduction in Made in China tire imports from 2009 to 2011, but that didn't mean 30% more tires were produced in the U.S. It just meant that 30% more tires were imported from Canada; 110% more from South Korea; 44% more from Japan; 152% more from Indonesia; 154% more from Thailand; 117% more from Mexico and 285% more from low volume provider Taiwan, according to the U.S. International Trade Commission.
The tariff will be up for review this year and is one of the most publicized of the ongoing China-U.S. trade disputes.
Last week, Wall Street Journal reporter John Bussey spoke to a tire retailer and a spokesman from Goodyear about the tariffs. The consensus on both sides of the business is that China's low cost tires now cost too much, and the consumers are paying the price for it. In some cases, tire prices have nearly doubled.
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The measure was meant to whack imports of passenger and light-truck tires and give a boost to manufacturers and job creation in the U.S. But a close look at the government numbers shows there has been no big boost at all.
"The tariffs didn't have any material impact on our North American business," Keith Price, a spokesman for Goodyear told the Journal. "The stuff coming in from China is primarily low end. We got out of that market years go."
Obama's tariff has had only a marginal effect. And whether or not the jobs that were created -- a thousand at least according to the president -- is due to the China policy, or just a revved up U.S. auto industry is unknown. The U.S. Census Bureau does not produce manufacturing output data for the lower-end tires that were effected by the tariff. State and local government incentives are doing a better job at increasing the manufacturing jobs in this sector. Bridgestone is investing $1.2 billion in South Carolina to produce high end construction vehicle tires. The company said it would create 850 jobs over the next 8 years. Those particular tires do not have Chinese competition affected by the tariff.
U.S. China Business Council President John Frisbie said Tuesday night in a statement after Obama's speech that the multinational lobby disagreed with the president's assessment on the success of the tariff.
“We disagree that the tariffs on imports of low-end Chinese tires have had any positive effect on American jobs or the American economy. All evidence suggests that the beneficiaries have been other low-end tire producers in Asia and Mexico," he said.
“Few issues loom as large on America's economic and foreign policy agendas as our relationship with China. This is the defining global strategic issue for the United States going forward. U.S. exports to China are strong and getting stronger. American companies have numerous options when China doesn't play fair. Direct negotiation with China is the best first approach to dealing with commercial problems American companies have with China. But we also can use other sound legal tools—such as anti-dumping investigations and World Trade Organization cases—and have done so successfully," Frisbie said.
The U.S. China trade deficit continues to grow month over month, according to the U.S. Census Bureau. Yet, China has been the America's fastest growing export market since it joined the World Trade Organization and is the only major market since 2000 to have averaged the 15% growth per year needed to meet Obama's goal of doubling U.S. exports by 2014.
See: Get-Tough Policy On China Tires Falls Flat--Wall Street Journal
