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Manufacturing sector split as Trump moves forward on Chinese tariffs

Time2018-09-28     Reserved

President Trump has announced he will go ahead with new tariffs worth an estimated $200 billion on more than 5,700 products imported from China.

Most business sectors in the U.S., including the auto aftermarket, received the news with dismay, but somesuch as U.S. retreadershailed the tariffs as a key protection against an onslaught of unfairly underpriced Chinese imports.

The Office of the U.S. Trade Representative released the final list of goods, coming to 194 pages with a total of 5,745 tariff lines, on Sept. 17. Tariffs of 10 percent on these items become effective Sept. 24, with an automatic increase to 25 percent on Jan. 1, 2019.

The original list issued July 10 ran to 205 pages and contained 6.031 tariff lines. 

The revised list contains hundreds of tire- and rubber-related items, including:

  •  Virtually every type of pneumatic tire, including passenger and light truck tires, truck and bus tires, racing tires, agricultural and forestry tires, construction and mining tires, retreads and used tires;
  •  A long list of rubber chemicals, synthetic rubber and polymers, and grades of natural rubber; 
  •  and Rubber auto and industrial parts including V-belts, conveyor belts, tubes, pipes and hoses.

In announcing the new tariffs, USTR said there was no change in Chinese trade policies from the administration's Section 301 investigative report released in March 2018.

In that report, USTR said it discovered that:

  •  China uses joint venture requirements, foreign investment restrictions, administrative reviews and licensing processes to pressure U.S. companies into technology transfers.
  •  China deprives U.S. companies of the ability to set market-based terms in technology-related negotiations.
  •  China directs and facilitates investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
  •  China conducts and supports hacking into U.S. commercial computer networks to gain unauthorized access to business information.

Setting tariffs on $50 billion worth of Chinese goods in July and August did not persuade China to change its unfair acquisition of U.S. intellectual property, USTR said in its Sept. 17 statement.

"Instead, China responded to the U.S. tariff action by taking further steps to harm U.S. workers and businesses," the agency said.

"In these circumstances, the president has directed the U.S. Trade Representative to increase the level of trade covered by the additional duties in order to obtain elimination of China's unfair policies," it said.

Industry divided on tariffs

Comments on the new tariffs were consistent with testimony before USTR during six days of hearings, Aug. 20-24 and 27, in which representatives of various sectors spoke for or against the proposed action.The Motor & Equipment Manufacturers Association, which testified against the tariffs, said it opposes using tariffs to curb intellectual property theft.

"The retaliatory tariffs announced on Monday could negate the Trump administration's recent successful work on behalf of American companies, such as tax reform," MEMA said in a statement issued Sept. 18.

According to MEMA, the tariffs "will serve as a tax increase on the American public and consumers by increasing the costs of a new car or truck and of maintaining the hundreds of millions of vehicles currently on the roads."

Matthew Shay, president and CEO of the National Retail Federation, agreed with MEMA that the tariffs constituted a tax on consumers.

"It's disappointing that, despite the voices of those impacted, the administration continues to advance harmful tariff policies that threaten to weaken the U.S. economy," Mr. Shay said.

"Every time this trade war escalates, the risk to U.S. consumers grows," he said.

Jay Timmons, president and CEO of the National Association of Manufacturers, said the new tariffs would do more harm than good.

"Over the last year, manufacturers have delivered for our communities and our people, raising wages, building new plants and creating new jobs thanks to game-changing tax and regulatory reform," Timmons said. "But more U.S. tariffs and Chinese retaliation risk undoing that progress and moving our economy in the wrong direction.

"With every day that passes without progress on a rules-based, bilateral trade agreement with China, the potential grows for manufacturers and manufacturing workers to get hurt," he said. "No one wins in a trade war."

However, Elizabeth Brotherton-Bunch, digital media director for the Alliance for American Manufacturing, said Trump's reasoning for issuing tariffs was sound.

"China has consistently engaged in unfair trade practices and broken trade laws," Brotherton-Bunch said. "Chinese officials have done little to stop this. Even folks who disagree with some of Trump's trade moves agree that China is a big problem."The Tire Retread & Repair Information Bureau is a wholehearted supporter of the new tariffs. TRIB emailed copies of the USTR press release on the tariffs, as well as a link to its testimony before USTR Aug. 20 in favor of the tariffs.

The U.S. retreading industry offers safe, reliable and high-performing tires to domestic truck fleets, TRIB Managing Director David Stevens said in his testimony. It offers fleets a low-cost alternative to expensive new truck tires while delivering massive environmental benefits by saving natural resources, reducing carbon emissions and preventing scrap tires from being dumped in landfills, he said.

"However, this industry and its U.S. employees are under severe threat from low-cost, low-quality truck tires being imported from China," Stevens said.

Since 2013, the compound annual growth rate for the replacement commercial truck tire market has been 5.4 percent, whereas the retreaded truck tire market shrunk by 2.1 percent annually during those years.

Joining TRIB in its support of the tariffs was Gene Walker of Farmingdale, N.Y.-based Premier Rubber Co., who also testified at the USTR hearings. Premier Rubber collects buffings from retread facilities across the U.S. to make playground surfacing and other recycled rubber goods.

Cheap Chinese truck tires endanger Premier Rubber's business as much as they do its retreader suppliers, according to Walker.

Between 2014 and 2017, the amount of buffings collected from retreaders fell from 17.8 million to 15.6 million pounds, Walker said. "That decrease is the equivalent of 400 truckloads of buffings."

Walker also is a supporter of Retread Instead, an organization devoted to promoting and protecting retreads as an alternative to low-quality new truck tires.

Retread Instead has conducted a letter-writing campaign to members of the U.S. Senate promoting tariffs against Chinese truck tires.

It also is working with members of the Senate Finance Committee to secure confirmation of President Trump's nominees to the International Trade Commission, he said.

The ITC drew the ire of retreaders and allied businesses when in February 2017 it voted not to levy countervailing or antidumping tariffs against Chinese truck and bus tire imports, despite having done so with Chinese passenger, light truck and off-the-road tires.

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