Tariffs on Imports From China - Report Example

Tariffs on imports from China Tariffs on imports from China US and China are close trade partners fordecades now. In fact, China serves as the second largest market for the goods from US. Goods worth billions of dollars across the two countries borders annually. Tariffs refer to the tax that the state charges on the goods that enter or leave a country. The tariffs could be used by one government to restrict trade. A government could restrict trade by increasing on the cost of the commodities getting into its country. Increasing prices on imported goods could make them more expensive as compared to the local goods. Thus, the local consumers would buy the local goods and avoided the imported products. The US has recently imposed tariffs on the tire products from China. Are the tariffs imposed on tire products from China beneficial to the United States? China and US are each others major trading partners. By the year 2011, the trade on goods and services from the two countries totalled to 539 billion dollars. In addition, China is the largest tire exporter to the United States. It has exported more than 70 million units of tire each year. However, the figure has been decreasing since the establishment of the tariffs. In 2009, the president of United States, Barrack Obama, signed a law that placed a tariff of 35 % on the tire products from China (Currie 2011). The argument was that the imports from China had increased from 4.7 to 16.7 % in a period of four years. The sudden increase of tire imports from China were calculated from the year 2004 to 2008. Other tire exporters to United States include Thailand, Taiwan, Indonesia, South Korea, Canada and Japan. The graph below shows the amount of tire exports to US from the above countries since 2007 to 2011. (Petis 2013) The aim for the increase of tariffs on China tires was to assist the local industries grow. However, the move was a benefit to other tire exporters to US such as Japan and South Korea. It limited the chances of Chinas products to compete fairly with the products from the other exporting countries. The administration claimed to have recovered thousands of jobs in the tire industry, in America. One of the reasons for the tariffs on tires from China was to create an opportunity for the growth of the local industries. Since then, the US Bureau of Labour Statistics, has indicated that thousands of people have received employment in the tire industries. However, the number of those employed in such industries keeps on reducing. The reduction is because of the tough rules introduced in the market. In addition, many have favoured manufacturing tires in foreign countries. Thus, the local industries seem not to benefit that much from the new tariffs imposed on tires from China (Petis 2013). The reduction in the tire imports did not have a consequent increase in local products production. As noted earlier, the tariffs were only imposed on tires from China, and not on the other exporters. In addition, as stated earlier, the local tire industry cannot match the foreign industries in manufacturing the goods. Thus, the reduced amount of imports were replaced by an increase in exports from the other tire exporters to United States. The other countries increased their exports by 30%, 110%, 44%, 152%, 154%, 117% and 285% from Canada, South Korea, Japan, Indonesia, Thailand, Mexico and Taiwan respectively. From the data, it is an indication that the main beneficiaries are the countries from Southern Asia. It has increased the market for their products as China cannot compete them in the US market. The prices of the tires from China have doubled in price making them unaffordable in the market (Currie 2011). The jobs created in by the rise in tariffs were offset by those lost by the same, in other parts of the economy. The argument here is that the government was saving few jobs at a high cost. As indicated earlier, the number of jobs created does not match the effect that the tariffs have caused on the trade relationship between US and China. In addition, many others have lost their jobs because of the sudden twist in trading activities. While the state creates employment in one area, in the country, other citizens are unable to remain in the trade as the products prices are not friendly for business (Sutter 2013). Therefore, the condition on job opportunities is not friendly as expected. There is the case of unemployment that rocks the country. The government argument in increasing the tariffs stated that it would create thousands of jobs each year in the local industries. In fact, there is evidence that the number jobs at the tire industries have significantly stabilised but not increased, since the passing of the tax tariffs. The graph below indicates the effect of the tariff on the employment of workers at local tire industries. (Moosa 2012) Although it is impossible to indicate the exact reason for the stabilisation, it is evident that the introduction of trade tariffs in the imports had a role in it. Many expected that the tariffs would increase the number of employment opportunities incredibly each coming year (Mankiw 2012). The tariffs on tires from China have placed the local prices higher than they were before. The idea of placing tariffs on any importing good is to allow the sale of the local goods in the country. The local industries would dictate the pricing of the local commodity in the market. Since the imported good would be very expensive for the local market, the local goods would have little competition. Thus, companies could sell their goods at a high price without having to worry about a cheap competing product from a foreign industry (Mankiw 2012). Since 2011, the consumers have paid high prices in tires locally totalling to 1.1 million dollars. The money increased goes to the owners of the company despite saving only a maximum of about 1200 jobs in the industries. Most of the industries that manufacture tires in the US are foreign companies. Thus, the local industries are the ones who benefit from the effects of tax imposition and not the local people as stated by the government (Currie 2011). China was not happy with the move that the US took to increase tariffs on its goods. It demonstrated imbalance in the trade agreement between the two countries. Both nations belong in the World Trade Organisations. Being members of the organisation, both countries are to adhere to set trading rules. China had no choice but to complain sins the move was inhibiting trade between both nations. US and China have been trading partners with each benefiting massively from one another. In 2009, China had tire exports to US totalling to 1.3 billion dollars. The US, on the other hand, had 800 and 376 million dollars in exports of automotive and chicken products respectively. The graph below indicates the trading relationship between China and United States of America (Carbaugh 2013). (Moosa 2012) In recent years, the US has been preventing China from accessing the market for other products. The Chinese government backs down at such attempts to maintain good trading activities between the two nations. The trading relationship between the two countries indicates that the US exports a dollar for every 4.46 dollars that are imported from China. Thus, it is an indication that the US tries to cut down on the imports that the country makes from China. As stated above, the room left by the reduced import of tires from China, was taken by the countries from Southern Asia and not the local tire industries in US (Moosa 2012). In what is known to be a retaliation by the Chinese government, it has places anti dumping tariffs on cars imported from US. The Chinese government investigated the issue by looking into cars imported from the United States. An analysis of the vehicles in question by the Chinese government is as indicated below. (Moosa 2012) Many view this as a response to the tariffs that the US had placed on the tires from China. In addition, it is an indication of a war that is taking place between China and US. War between trading partners would not be good for the economy of both countries. It is the role of World Trade Organisation to settle such matters. Thus, this is another indication that the tariffs on tires from China is not useful to the US. Instead, it has started a trade war between competing countries in terms of economy. War between trading countries is not good for the global economy (Carbaugh 2013). In conclusion, the tire tariffs placed on China is not beneficial to the economy of United states. According to the study above, the main reason for setting up the tariffs is to increase the productivity of the local industries. From the facts stated, the local industries do not perform much different from when the tariff were not in place. In fact, if the government wanted to cut down on the imports, it could have set the same tax on all foreign tires in the market. Choosing one country to put tariffs is an indication that the government had a different purpose intended. In addition, the lost imports from China have been replaced by imports from other tire exporters. In job creation, the government has managed to achieve very little. Few jobs have been created in the local industries as others lose theirs in other parts of the economy. Thus, the tariffs have not done much to assist in job creation locally. On the other hand, the tariffs have waged a trading war between China and US. China decided to put dumping tariff on cars imported from US. War between trading countries is not good for the global economy. With the discussion stated above, tariffs imposed on tire products from China, does not benefit US. References Carbaugh, R. J. (2013). International economics. Mason, OH: South-Western CENGAGE Learning. Currie, D. M. (2011). Country analysis: Understanding economic and political performance. Farn Mankiw, N. G. (2012). Principles of macroeconomics. Mason, OH: South-Western Cengage Learning. ham Surrey: Gower Pub. Moosa, I. A. (2012). The US-China trade dispute: Facts, figures and myths. Cheltenham: Edward Elgar Pub. Pettis, M. (2013). The great rebalancing: Trade, conflict, and the perilous road ahead for the world economy. Princeton: Princeton University Press. Sutter, R. G. (2013). U.S.-Chinese relations: Perilous past, pragmatic present. Lanham, Maryland: Rowman & Littlefield Publishers, Inc. Read More