How Obama’s tire tariffs have hurt consumers

October 23, 2012

During the candidates' discussion of China Monday night, Barack Obama touted the tariffs he imposed on Chinese-manufactured tires:

We had a tire case in which they were flooding us with cheap domestic tires — or — or cheap Chinese tires. And we put a stop to it and as a consequence saved jobs throughout America. I have to say that Governor Romney criticized me for being too tough in that tire case; said this wouldn’t be good for American workers and that it would be protectionist.

But I tell you, those workers don’t feel that way. They feel as if they had finally an administration who was going to take this issue seriously.

This came up in our liveblog and charting of the debate, but it's worth emphasizing what a bad deal those tariffs were for consumers. The best evaluation of the program comes from Gary Clyde Hufbauer and Sean Lowry at the Peterson Institute. Their study found that after Obama imposed the tariffs, employment in the U.S. tire industry grew by 1,200 jobs. Hufbauer and Lowry figure that this is the maximum number of jobs the tariffs could have created or saved, a generous assumption given that tire employment was already trending upward:


How much did those 1,200 jobs cost? About $1.1 billion, Hufbauer and Lowry found, all borne by consumers who were forced to pay higher American prices for tires, prices which shot up still higher when freed from competition with China:

That's about $900,000 per job, and likely more given how generous the 1,200 jobs saved figure is. By contrast, one study found that the state aid provisions of the stimulus cost $28,571.43 per job-year saved, while another three studies put the overall cost-per-job for the bill at around $250,000. And the cost of the stimulus is ultimately borne through the income tax, which is highly progressive, while higher consumer prices are disproportionately borne by the poor.

Economists are unanimous that trade, and trade with China in particular, is good for the United States. And tire tariffs impede that. They were a raw deal for U.S. consumers, and a rawer deal for Chinese factory workers who were put out of jobs. Hufbauer and Lowry found that tire imports from China fell by 67 percent due to the tariff, which in addition to hurting U.S. consumers, surely hit Chinese manufacturing workers as well.

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Brad Plumer | October 23, 2012