Updated: Feb 28
In the midst of many ongoing international tariff wars—including the most well-known battle between the US and China—Charles Klein, Station Manager of OEC Group’s Detroit office, discusses the long-term repercussions of tariffs levied on imported tires decades ago.
Could you introduce these duties that predate our current “tariff war”?
Of course. In 2009, President Obama imposed a substantial 35% tariff on all tires imported from China. The duties were meant to quell a 215% increase in tire imports from China between 2004 and 2008, reverse a 25 percent decrease in American tire production, and promote growth within the United Steelworkers Union (USW). The USW, the group responsible for representing union tire plant workers, had reported significant job losses due to the shift.
How were those taxes received? What impact did they have initially?
The tariffs were fairly controversial from the beginning. They received a standard ribbing from across the aisle and were reduced in the proceeding tariff review. By 2012, this iteration of tire tariffs was put aside completely. A widely cited 2012 review of the duties from the Peterson Institute concluded that they were marginally helpful in job growth, but they pushed the average price of both American-made tires and Chinese-made tires up by around 3.2% and 26% respectively. Additionally, tariff retaliation from China targeted US chicken exports and reportedly cost that industry one billion dollars. The Peterson study also found that, although some production was brought back to the US, other supply lines simply shifted away from China. Mexico, Canada, South Korea, Japan, and Taiwan were some primary winners.
What impact (if any) do those tariffs still have on our market today?
Before and after those 2009 duties, rubber products and tires have been consistently included in the United States’ Harmonized Tariff Schedule (HTS). One consequential duty that has been percolating recently specifically targets passenger and light truck tires imported from China. Earlier this year, the US Department of Commerce investigated the efficacy of the tariff, and actually decided to lower some of the duty percentages. Anti-dumping duties enforced on Chinese manufacturers that export tires to the United States were lowered to 2.06%.
Did this cause any readjustment to the international tire market?
The first set of tariffs moved some manufacturing back to the US and spread another chunk to regions outside of China. The second set of tariffs specifically targeted tires made in China for passenger vehicles and light trucks. A piece of the tariffs’ cumulative impact has been that common passenger and light truck tires—currently taxed significantly—have been more regularly produced in the United States. High-end tires that enthusiasts will pay a premium are still largely manufactured in China. Additionally, projections within the tire vertical suggest that high-end tire market growth will be primarily led by the Asia-Pacific region, including China, India, and Japan.
What does this mean for tire retailers and/or shippers?
When you boil all of this down, both retailers and shippers in the industry should know that high-end tires are logistically much more difficult to get than common passenger and light truck tires because supply lines for those tires originate in China, are largely routed through the West Coast, and then are either railed or trucked inland. Delays may have let up over the last six months or so, but for the last several years that has been one of the most—if not the most—delayed route in the entire market.
Any repercussions for the end consumer?
A domestic lack of UHP tires may seem to be a niche issue for hobbyists, but that’s not necessarily true. Part of what places a tire in that classification is its capability to improve traction, handling, and overall performance. They have improved roll resistance, as well. Roll resistance, and to some degree traction, are the two most important factors when calculating a tire’s contribution to overall fuel efficiency. Optimal roll resistance helps conserve energy when stopping and starting, and its effects compound when driving over long distances. Historic difficulty securing these tires happens to intersect with a similar level of difficulty in securing brand-new vehicles and some of the highest gas prices in history.
Do you have any advice for shippers trying to transport tires effectively?
Developing an effective strategy to connect consumers and useful products like UHP tires is impractical without specialized data and expertise. I strongly suggest partnering with a logistics provider that can leverage transit time data and ground-level information on available shipping routes to build supply lines that are more consistent, resilient, and cost-effective.