Transcript TARIFF ON CHINESE TIRES

Year
U.S. Tire Plants
2006-2007
4 plants closed
2008
3 plants closed
2006-2008
1 plant opened
The U.S. imports of Chinese tires more than
tripled from 2004 to 2008.
The USITC
determines
Imported
Product
Increase in
Quantities
Injury or
Threat to a
Domestic
industry
recommends
Tariff as a Relief
Imposes
The
President
THE USITC
Adjustment
 1st year: 55%
 2nd year: 45%
 3rd year: 35%
THE U.S.
PRESIDENT
 1st year: 35%
 2nd year: 30%
 3rd year: 25%
PROS
CONS
To increase the U.S.
domestic tire industry
competition
 To increase a domestic
employment
 To have a tax revenue that
can be used for other
purposes


The U.S. tire consumers have
to pay a higher price
 The duties would be an act of
protectionism and a violation
of global free-trade principles
 There is a high probability
that China will retaliate on
import of chicken from the
U.S. and could sell some of its
extensive holding of U.S.
Treasury debt.
p
im
p
ft
p
ex
A
E
B
F
C
G
D
H
Q
p
im
p
ft
p
ex
a
b
e
c
f
g
d
h
Q
Welfare Effects on an Import Tariff
Consumer Surplus
Producer Surplus
Government Revenue
National Welfare
- ( A+B+C+D)
A
C+G
p
im
p
ft
p
ex
A
E
B
F
C
G
D
H
G – (B+D)
Q
Welfare Effects on an Import Tariff
Consumer Surplus
Producer Surplus
Government Revenue
National Welfare
e
- (e + f + g + h)
0
p
im
p
ft
p
ex
a
b
e
c
f
g
d
h
- (f + g + h)
Q
Importing Country
Consumers
Producers
+
Exporting Country
Consumers
+
Producers
-
Government
Country
Government
Country
+
+/-
No Effect
-