U.S. tariffs on tire imports from China
Which groups benefitted from the imposition of US tariffs on Chinese tyre imports?Which groups suffered? What does this tell you about tariffs in general?
Answer. The tyre manufactures from other low cost economies like Thailand, Malaysia and Mexico were the most benefitted parties in this process of raised tariffs on Chinese tyre importation into United States. The sufferers were comprised of the two main segments involved in the international tyre markets. First, the native Chinese tyre exporters who were levied upon higher import tariffs suffered heavily in terms of raised costs and consequent loss in profitability. Second, the US based manufacturers who setup their low cost plants in China and were exporting tyres to US suffered heavily under the tariff hike. This tells us that tarrifs in international trade ought to be subjected to gradual changes as both the linked parties get seriously affected due to changes in the tariffs.
How do you think that US would have reacted if Chinese would have raised tariff rates on importation of US goods into China?
Answer. The United States government (if subjected to similar situations as China had) could have petitioned for a ban from the WTO as their economy is not as low cost as China and such a blow might have eroded their profitability to pieces. Further, US government always tries to impose its international market presence to act biased in its own favour, so above-stated act would have been most obvious one.
What does the rise of tyre imports from Thailand, Malaysia and Mexico during 2010 and 2011 tell you about the value of this kind of trade policy?
Answer. The rise of tyre imports from other low cost nations like Thailand and Malaysia gives two important deductions regarding the prevalent trade policy. Firstly, there was not a general import/export policy for all the importers and customised trade tariffs were allowed by WO rules. Secondly, the trade policy was overridden by other nations who were in pursuit of maximizing their market presence in absence of Chinese low cost products.
Answer. No, the adopted policy of tariff hike by US government was not the best policy as it was clearly visible that other importers from Asian countries grabbed the vacant market. Further, even when the Chinese suffered frop in tyre exports to US, there was an attack on the Chinese market by other importers as the Native American tyre manufactures were not capable of scaling up their capacities. Instead of merely raising the tariffs, US government could have raised the quality of import standards and laid foundation for better domestic capabilities.
