Obama Concedes to Union in Trade Tariff Decision

President Obama earned his union stripes with his decision to level tariffs on Chinese tire imports into the United States. Some big questions remain: will the Chinese retaliate? Will the action actually save American jobs? And perhaps most importantly for the White House, will conceding to the Union – a major campaign supporter – help in the President’s push for health care reform?

In a late Friday night announcement, the White said the President would,” remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case,” by imposing a a 35% duty on passenger vehicle and light truck tires.

The United Steel Workers Union, which represents US tire workers, won an International Trade Commission (ITC) ruling that called for 3 years of tariffson Chinese made tires, starting at 55% and falling by 10% each of the next two years.

While the President is imposing a 35% tariff which reduces to 25% by the third year, the Union is nonetheless pleased.

"For far too long, workers across this country have been victimized by bad trade policies and government inaction. Today, President Obama made clear that he will enforce America's trade laws and stand with American workers," USW International President Leo W. Gerard said.

The irony is that the tire companies and the association of tire dealers did not support the tariffs.

“We are certainly disheartened that the President bowed to the Union and disregarded the interests of the thousands of other American workers and consumers,” said Marguerite Trossevin with Jochum Shore & Trossevin and counsel to the Coalition.

The imported tires are actually made for Goodyear, Michelin, Cooper and Bridgestone using the cheaper labor and materials in China. Those companies tend to focus their domestic plants on higher quality and higher performance tires, but the low end tires account for about 15% of the market. Tariffs would raise their prices and presumably reduce the amount of sales.

With the tariff, experts believe that no only will the tire companies seek cheap labor in other countries like Vietnam and Indonesia, but that more American jobs – particularly in the retail end of the tire industry -- will be lost overall.

Professor Tom Prusa, of Rutgars University, completed a study to evaluate how many jobs would be saved as a result of the tariffs. The answer was none. In fact, he belives that up to 20,000 jobs in related tire industries will now be lost as result.

Section 421 of the trade law under which the tariff will be imposed, was created as a concession to get China into the World Trade Organization.

Despite similar cases brought on during the Bush administration, President Bush never chose to enforce the tariffs because of the perception

"For the President to take this kind of decision, I think, would undermine American credibility in trying to revive the global economy," noted Dennis Wilder, an East Asia expert at the Brookings Institute