Safeguard Tariffs

A study from Peterson Institute for International Economics states that following the implementation of the tariffs, imports from china decreased from 1,631 thousand in the third quarter of 2009 to 643 thousand by quarter four that same year representing a 39% decline. While during that same period imports from other countries rose by 26% from 3 million to 3.7 million. Moreover, more recently data from the third quarter of 2011 shows that the number reached 42%. Its evident that the safeguard tariffs exerted a significant substitution effect on the quantity of US tire imports from China. In other words, foreign suppliers were replacing China as the major source of imports as U.S manufactures continued their business strategy of moving production
to countries with less strict environmental and safety controls ,less active unions and lower cost. According to the U.S International Trade Commission approximately 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 providers such as Taiwan. Theses countries benefited substantially from stepping into Chinas market shoes. Evidently, foreign firms, not US producers, are largely filling the space once occupied by the China tires industry. Moreover, jobs saved in the manufacturing industry were almost certainly off set by the job less in the retail sector.
The tariff safe guards caused tire prices to more than double resulting in consumers to spending more on tires and less of their disposal income on retail goods. According to Gary Clyde Hufbauer and Sean Lowry of the Peterson Institute for International Economics there are roughly 3,507 retail sales jobs created in the United States for every one billion dollars spent in the domestic retail market. Furthermore, roughly 1,112 million is extracted from US consumers annually in result of the safeguards while at the same time Hufbauer and Lowry note the tariff put 48 million in the pocket of otherwise unemployed tire workers. Consequently, reducing consumer spending on retail goods by approximately 1,064 million indicating that this cost the american retail sector around 3,371 jobs. This information provided by Hufbauer and Lowry supports that US attempt to bring jobs were not successful in fact the 1,200 manufacturing jobs saved actually cost the American economy 2,531 jobs. Trade protection often takes more jobs from the retail sector than it saves in the manufacturing
sector. Furthermore, the safeguard tariffs threatened the trading relationship with China, in addition to consumers, producers and society as a whole.
The Chinese government strongly opposed trade protectionism used by the U.S and the U.S raising trade barriers only incentivised China to do the same. Hufbauer and Lowry report that on February 5, 2010, China announced its plan to impose antidumping tariffs ranging from 50.3 to 105.4 percent and countervailing duties between 4.0 and 30.3 percent on U.S and other foreign chicken part exports to China. As a result of the Chinese tariffs exports were reduced by $1 billion in conjunction with U.S poultry firms experiencing an 90 percent decrease in exports of chicken parts to China. The U.S risked angering their second largest trading parented at a time when it needed it the most.Moreover, the U.S forbidding domestic producers from outsourcing to China leaves U.S firms less competitive in the world market due to the fact that outsourcing provided firms the ability to take advantage of lower wages offered
abroad. U.S Consumers are arguably the most impacted by the safeguard tariffs because of the significant increase in prices. First, the U.S tire industry expected a price increase form the shift to non-Chinese tire imports. According to Hufbauer and Lowry’s findings there was a annual cost increase of $816.7 million ( $716.0 million related to car tires and $100.7 million related to light truck tires). These results show the annual cost inflicted on American consumers as a result of the switch from Chinese tires to other foreign countries like Thailand. Moreover, there was in increase in prices of U.S made tires the safeguard enabled domestic producers to raise their above what would have been normally acceptable due to the decrease in competition. In addition, Hufbauer and Lowry conclude that gross annualized cost of the safeguard tariffs to American consumers in 20011 was $1,112 million. This number was calculated by adding the $817 millions price increase form the shift to non-Chinese imports and the $ 295 million price increase in US-made tires. Both go on to state the total cost to consumer exceeds $900,000 per job saved. Furthermore, “ studies show that consumer cost of trade protection typical exceeds, by a wide margin, and reasonable estimates of what a normal job program might cost.” Most of the money extracted by proaction from household budgets goes to corporate coffers, at home or abroad, not paychecks of American workers. In the case of tire protection, Hufbauer and Lowry’s estimates that less than 5 percent of the consumer costs per job saved reached american works ( $48 million out of $1,112 million).