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OH: You saved that! Obama’s tire tariffs cost Americans $900k per U.S. job saved

By   /   September 17, 2012  /   7 Comments

By Jon Cassidy | Ohio Watchdog

COLUMBUS – President Barack Obama had a clear message for Cincinnati and Columbus during visits Monday: auto manufacturing is too important to the economy for the government to let it fall victim to foreign manipulation.

If hypocrisy could be measured in dollars, the President’s argument about auto subsidies would rank right up there.

He promoted his administration’s $80 billion package to protect United Auto Workers contracts from General Motors’ bankruptcy restructuring and announced that the U.S. would be filing a new complaint with the World Trade Organization accusing the Chinese government of giving money to its own auto parts industry.

“The auto industry represents a country’s overall economic strength,” he said. “The government should provide vigorous support.”

Wait. Sorry. Obama didn’t say that. That was Zhang Ji, an official in China’s Ministry of Commerce, back in 2006.

The Chinese idea of vigorous support is less robust than Obama’s. Over an entire decade, some 73 Chinese auto parts companies got a total of $2.3 billion in direct subsidies (plus another $25 billion in indirect subsidies, such as cheap electricity and glass, etc.) from their government. At least, that’s the total found by the quasi-socialist Economic Policy Institute, the only think tank in the country known to argue that trade costs jobs. In its WTO complaint, the administration estimates China’s auto-industry “subsidies amounted to at least $1 billion from 2009 through 2011,” the Wall Street Journal reported.

By comparison, U.S. taxpayers now stand to lose $25 billion in cash the Obama administration gave to General Motors, plus another $15 billion-plus in tax breaks on future earnings.

Obama spoke harshly of (Chinese) government support for the (Chinese) auto industry: “Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest. It’s not right; it’s against the rules; and we will not let it stand.”

In March, 188 members of Congress wrote a letter to Obama, calling for him to file a complaint with the WTO.

The Obama administration did just that Monday, committing to the sort of Yellow Peril demagoguery that U.S. Sen. Sherrod Brown, D – Ohio, has made a career out of.

Lately, both parties have been menacing the populace with this imaginary hobgoblin. For more than a year, Republican Mitt Romney has been decrying Chinese “cheating” and making claims of currency manipulation that he surely knows to be fraudulent. In real life, the renminbi, China’s currency, has been steadily appreciating against the dollar since 2005.

U.S. Sen. Rob Portman, R – Ohio, took advantage of the announcement, too, and he’s not even running for anything.

“I continue to be disappointed that President Obama has refused to take on China’s manipulation of their currency, which he has failed to do seven times since being elected,” he said in a statement.

Here’s how China could increase the renminbi’s value: dump $1.2 trillion in Treasury bonds. Of course, that would drive up the interest the U.S. pays on its $16 trillion in debt, which Romney, Obama, and even Brown know.

China was quick to respond to Obama’s flexing, taking a complaint of its own to the WTO Monday, disputing a law signed in March that allows the ex post facto application of two kinds of tariffs to imports.

This is the latest escalation in a trade dispute Obama started in 2009 by putting a tariff on tire imports. China responded with a tariff on poultry imports and auto parts that cost the poultry industry more than $1 billion in lost sales, according to one study.

When the U.S. went after solar panels and 21 other products, China announced in December that it would impose tariffs on imported vehicles manufactured by Chrysler and General Motors, the beneficiaries of the auto bailout.

This is the eighth complaint against China Obama has filed with the WTO this year. In his 2012 State of the Union address, Obama bragged about his decision that started the fight: “Over a thousand Americans are working today, because we stopped a surge in Chinese tires.”

The Peterson Institute for International Economics, a nonprofit, nonpartisan, research organization that focuses on international economic policy, studied the effect of the tariff.

In addition to the $1 billion in lost poultry sales, the tariff indeed saved a maximum of 1,200 American jobs. But the cost to U.S. consumers paying the tariffs was $1.1 billion in 2011, and most of that went to tire companies, and most of those were foreign.

In other words, it cost the public $900,000 per job saved.

Obama scored political points with the tire tariff, but he may have realized the damage it caused. The three-year tariff is set to expire next week.

Trade attorney Scott Lincicome writes that the administration would have had to file the paperwork six to nine months ago if it wanted a renewal, but it did nothing.

If Obama actually believes what he says about trade, why would he let it die?

CORRECTION: An earlier version gave an incorrect figure for China’s U.S. Treasury securities holdings.

CONTACT: [email protected]


Jon Cassidy was a former Houston-based reporter for Watchdog.org.

  • Watitis

    With Mr. Goolsbee out of the picture, Potus’s economic team has been
    crippled. This explains the ambiguity of his campaign’s “economic plan”
    which would deliver jobs and revenue needed to restore the more”traditional
    programs”. I honestly believe Obama’s community activism, labor organizational, skills neither qualifies him as arbiter or for that matter even
    as President of the U.S. My problem with this man is clearly his mindset,
    and were he would take this country. Heaven help us make the right

  • forrest

    Wake up Obama and Romney; I am sorry Mr. Obama you can’t; the main this that will bring back jobs to America is to take away the Tax incentives to American Companies to close here and move to China and other countries and institute import taxes of these American Companies that has and does. Also get us out of NAFTA with the countries that does not wish to abide by the treaty.

  • ok let me see if i have this right obama is trying to have charges pressed agenst another country for doing the same thing he did with the u.s auoto industry when he became our god forsaken president.lets guess do as i say not as i do

  • down with obama up with ron paul

  • Lane

    Well said! Are economic decline started shortly after Clinton left office. What did Clinton do right before he left office? NAFTA. We have been in economic decline since we joined and created this idiocracy. Start charging taxes and tariffs to all goods leaving and entering the country and make tariffs even higher for U.S. based companies with factories over seas to make up for the taxes they are skipping out on by having a factory in a country with cheaper taxes.

  • I don’t know about this and what you all are saying. All I do know is that I work for bekaert. We make car tires for everyone. Our jobs were slowly decreasing until this tariff was set. Then we sky rocketed, hiring 250 more employees just at this location. Now we are having the same problem now cause of a company called kiss. A steel cord company out of Asia. That can buy the rod for tires more than half of what we can. They have not been able to in the past. So someone tell me how this is possible all of a sudden. Could not a government supply the loss in their case to put all other competitors out of business. Cause look it up and see. Bekaert is probably the biggest company in the US that makes wire for the tires on your cars. And I promise we give you 100% better quality than foreign tire wire companies. So when you go down the road and have a blow out, or someone close to you is injured or maybe even killed in an accident due to a blow out. You probably would have wished the renewed that tariff.

  • Both China and the USA are members of
    the World Trade Organization. China is a provisional member since its
    internal domestic economy does not recognize patents, trademarks and
    copyright. That means both countries do not have tariffs on each others
    imports. In fact the average tariff on all products imported into the
    USA from all countries is less than 1%. We do believe and exercise free

    but the WTO does prohibit dumping and allows protective tariff if that
    can be proved. China got caught cheating the system, they were
    subsidizing the losses taken by their tire industry in order to sell
    products in the USA for less than the cost of production. What would
    China gain from that? well if American tire factories could not compete
    on price, those factories would have to be closed. Then in a year or
    two, China being the main supplier of tires to the American market could
    then up the price by any amount they chose. The government of the
    United States is not going to pay to rebuild our factories, and neither
    would private equity if China were free to dump at any time. So this is
    a case where “protectionism” is justified. An no there won’t be a
    reprisal because China does not want to give up its favorable trade
    status in the WTO. That’s why we litigate these issues with the WTO
    instead of shooting from the hip.