Import tariffs are an essential mechanism that helps to control the economic performance of countries. Tariffs are usually used to protect domestic markets and manufacturers from an influx of cheap foreign products. However, higher tariffs may have a subtle effect on a wide range of industries. Therefore, the impact of tariffs may be challenging to predict before implementation. The present paper analyzes the effects of tariffs imposed on Chinese manufactures of tires, steel, and aluminum in the US. The paper argues that even though tariffs may be a powerful tool for influencing the economic performance of the country, higher tariffs on the products mentioned above had an overall negative effect.
Tire tariffs have been a matter of concern since 2009 when President Obama raised them to 35% for Chinese manufacturers (Gillespie). The idea behind the new policy was to protect the jobs of tire manufacturers in the US (Hufbauer and Lowry 1). In the short term, the strategy was partially successful in achieving the set goal. When announcing the new policy, President Obama announced that the tariffs could save thousands of employees in the US tire industry. However, the analysis conducted by Hufbauer and Lowry concluded that only 1,200 jobs were saved (1). In the long-term, the policy cost the US economy around 2,531 jobs in other industries as the US citizens started to spend less money on other consumer products (Hufbauer and Lowry 1). Additionally, the prices of tires and vehicles increased, which also negatively affected the sales of the products (Hufbauer and Lowry 3). Ultimately, every saved job cost the US economy approximately $900,000 a year (Hufbauer and Lowry 1). Experts also argue that Obama’s tariffs did not make any difference for US manufacturers, as imports of tires from all the other countries increased (Gillespie). In summary, the tariffs on tires negatively impacted the US economy.
Steel and aluminum tariffs also had a questionable effect on the US economy. Even though President Trump’s decision to increase tariffs on steel and aluminum by 25% and 10% respectively saved 26,280 jobs, the new policy resulted in the loss of 432,747 jobs throughout the rest of the economy (Francois et al. 2). The job losses were associated with an increased cost of production of products made out of these raw materials. New tariffs on raw products increased imports of products made out of steel and aluminum. Thus, President Trump announced that he would be forced to raise tariffs on steel and aluminum products, including “nails, tacks, staples, cables, certain types of wire, and bumpers and other parts for cars and tractors” (Swanson and Eavis). However, experts doubt that such increases will improve the current situation (Swanson and Eavis).
The analysis provided above demonstrates that tariffs have a significant impact on the economic performance of countries. However, this impact is difficult to predict as the global economy is a complicated structure that may have hidden interconnections. Moreover, economics is also closely correlated with politics. For instance, the increase of tariffs on Chinese tires caused a rise of tariffs on US chicken parts exported to China (Gillespie). Therefore, when using tariffs for controlling economic performance, governments should carefully assess all the possible outcomes.
Works Cited
Francois, Joseph, et al. Policy Brief Round 3: ‘Trade Discussion’ or ‘Trade War’? 2018. Web.
Gillespie, Patrick. “Obama Got Tough on China. It Cost U.S. Jobs and Raised Prices.” CNN Business, 2017, Web.
Hufbauer, Gary Clyde, and Sean Lowry. US Tire Tariffs: Saving Few Jobs at High Cost. 2012, Web.
Swanson, Anna, and Peter Eavis. “Trump Expands Steel Tariffs, Saying They Are Short of Aim.” New York Times, 2020, Web.