TARIFF ON CHINESE TIRES

Statistical Evidence

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.

Safeguard

The USITC

Imported

Product

determines

Increase inQuantities

Injury or Threat to a Domestic industryre

com

me

nds

The President

ImposesTariff as a Relief

Tariff Penalty Rate

THE

USITC

1st year: 55%2nd year: 45%3rd year: 35%

THE U.S. PRESIDENT

1st year: 35%2nd year: 30%3rd year: 25%

Adjustment

Benefits VS. Drawbacks

PROS

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

CONS

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.

A B C D

E F G H

a b c d

e f g h

pim

pft

pex

pim

pft

pex

IMPORTING COUNTRY EXPORTING COUNTRY

WELFARE EFFECTS OF A TARIFF

Q Q

Welfare Effects on an Import Tariff

Consumer Surplus - ( A+B+C+D)

Producer Surplus A

Government Revenue

C+G

National Welfare G – (B+D)

A B C D

E F G H

IMPORTING COUNTRY

pim

pft

pex

Q

Welfare Effects on an Import Tariff

Consumer Surplus e

Producer Surplus - (e + f + g + h)

Government Revenue

0

National Welfare - (f + g + h)

EXPORTING COUNTRY

a b c d

e f g h

pim

pft

pex

Q

Exporting Country

Consumers +

Producers -

Government

No Effect

Country -

Importing Country

Consumers -

Producers +

Government

+

Country +/-

Tariff Effects on:

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