So Tired
China has been fiddling with its customs duties this week. Nothing unusual, but one item caught my eye. On Wednesday, Beijing announced that it will cut duties on natural rubber and rubber smoked sheet. I’m not sure exactly what rubber smoked sheet is, but apparently you can make tires with it. Beijing is bringing the duties down to help Chinese tire makers who face the Obama Administration’s safeguard duties against tires from China that were announced back in September.
Soon to be a tire
Now, let’s see how this works. The Obama Administration raises tariffs on Chinese tires in order to help American tire manufacturers and their loyal (to the Democratic Party) workers. This has the politically brilliant and apparently unforeseen effect of increasing prices for American tire consumers during a recession. The safeguard duties, of course, also create problems for the Chinese manufacturers, who find it more difficult to sell tires to the American tire companies who use them to supplement their product lines. Nor does this do anything positive for U.S. importers (or their workers) who supply tires to the American consumer. Think your local Goodyear store or Costco. So, the original U.S. action likely has little net benefit for U.S. workers, and hurts U.S. consumers and Chinese manufacturers.
In response, other than their amusing rhetoric about unfair trade, China sensibly reduces its customs duties on inputs for their tire industry. This, in turn, increases demand for natural rubber and rubber inputs from countries like Thailand, the Philippines and Malaysia, benefiting their rubber producers and workers. Indeed, prices for natural rubber and the shares of the companies that make it have been going up since the Chinese announcement.
So, now the real winners from the Obama Administration tire safeguards are revealed. Not the U.S. tire companies. Not the U.S. tire worker and their unions. No, it’s the rubber producers of Southeast Asia! Maybe the Obama Administration does have an international aid policy. Who knew?
