Recently, the White House moved quietly to impose a 35
percent tariff on automobile and truck tires coming from China. Now,
a set of tires that had been priced at $400 will cost Americans $540.
The problem isn’t so much that consumers
are going to be paying more for Chinese tires; instead, the real issue is that
this action carries considerable symbolic implications for the entire global
economy.
According to The New York
Times,1 the move on the part of President Obama
was prompted by the need to placate the United Steelworkers Union, which
represents the tire workers. Obama needs those unions behind
him, and not only for future elections; he must also be able to count on their
support of his health care plan and environmental legislation.
Technically, what Obama did was legal. Under Section 421 of the Trade Act of 1974, which China signed, the
President can impose tariffs on any product if he can show that foreign imports
of that product have disrupted the market.2 Of course, the very nature of competition in free markets
involves one competitor disrupting another to gain market share. So
putting an artificial handicap on any competitor that’s successful is
essentially doing away with a free market. And a global market
can only be free if all players are treated equally.
So it was a surprise to many “free
marketers” that, for the first time in history, the United States invoked
Section 421. In 1974, when the Trade Act was signed into law, it
included a provision in Section 201 that allows the International Trade
Commission to decide when “serious harm” is being done to an American industry
by a foreign import and to recommend protection of that industry by the levying
of tariffs.
But when China wanted to enter the World
Trade Organization, it made a special agreement with the United States (called
Section 42) that lowered the standards of section 201 — but only for Chinese imports.
The bar is set very low in this
provision. It’s not like anti-dumping cases. Any
company can complain to the government and seek protection under this section,
and the government has no burden of proof that unfair practices are involved.
The facts are plain: The
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