United States economy is getting a wall of tariffs and President Donald Trump said it will save American factories and jobs will be protected by limiting imports. However, business houses have different views and one such tire company, Richburg, S.C., opened last year, reminds globalization is hard to stop.
Let’s check this. American tire makers persuaded the government in 2009, in Obama era, to impose tariffs on tires imported from China. As an aftermath the imports fell sharply, but the Chinese companies made a different game plan to overcome the bar. They responded by moving production to other countries including US.
Chinese tire company Giti built a factory in South Carolina and started producing cheaper tires for Walmart. Similarly two other companies are now building tire factories in North Carolina and Georgia. Earlier this year one another Chinese tire company acquired a tire factory in Georgia.
The latest announcement of Trump reveals new tariffs worth of $50 billion products to be imposed from September 24. The products include clothing, food, electronics and many other daily use items. The trade war will not end here. The president has threatened to impose tax on all the Chinese products in future.
Meanwhile, Trump has imposed tariffs on aluminum and steel being imported from most of the countries and has warned similar actions would also be taken on cars and car parts.
Import tariff is an economical weapon by any government to raise prices of foreign goods in the country, usually above the price of domestic alternatives. The method also protects domestic jobs. However, it has been found such move is paid disproportionately by lower-income households, which is usually very large.
In 2011 it was found tariffs on tire imposed resulted with spending an extra $1.1 billion on tires by the people and preserved just up to 1,200 jobs. As an aftermath, the calculation reveals, this is about $1 million per job, which pays an average of about $40,000.
Similarly, President George W. Bush imposed tariffs on Steel in 2002 and the results were same. The move penalized consumers as well as companies that used the product to make other products. Estimate of an economist reveals 140,000 workers then made steel in the US but 6.5 million human resource made products that include steel.