Tires and Chicken Feet

Tires and chicken feet.  

Two items I would never even have thought of together. And yet, a trade war between the U.S. and China has created a closer relationship between the two than I think anyone could have imagined.

In 2009, President Obama imposed 35% tariffs on tires imported from China. He did this at the request of the United Steelworkers union, which also represents American tire workers. Shortly thereafter, China imposed tariffs ranging from 43.1% to 105.4% on chicken feet imported from the U.S. The main result, as far as I can tell, was increased prices for both Chinese and American consumers.

The labor union may have wanted the tariffs, but the Tire Industry Association did not. The tariffs did lessen imports from China, but rather than increasing American production, tire imports came in from new countries instead. This article, Obama's Half-Truth On China Tire Tariffs, from Forbes, tells of increased imports from Canada, South Korea and Japan, to name a few. Not only did the tariff not protect American jobs, it actually cost them. Before the tariff, the tire industry employed about 55,000 people. By 2010, that number had dropped to 51,600. And that's only half the insanity.

There is not a huge market for chicken feet in the U.S. Most Americans are uninterested in them as a food, unlike many Chinese who see them as a delicacy. So U.S. chicken farmers sell them to China, among other countries. But China claimed that the chicken feet were being dumped into their markets, and responded with anti-dumping tariffs. Never mind that chicken feet sell for more on the Chinese market than they do domestically. 

I really don't understand trade wars. It seems to me that no matter what angle you look at this crazy situation from, no one was actually helped by the protectionist actions on either side. And, as usual, it was the individual consumer who took the brunt of things, with higher prices all around.

If a new tire manufacturer opened in the U.S., and was able to sell tires at a lower cost than their competitors, well, that would just be capitalism at work. But if the tires are from another country, they're a threat to our very way of life! I thought that capitalism was supposed to be our way of life. I may be something of an idealist (or even a lot of an idealist), but I really dislike hypocrisy. I don't really know whether the members of our government believe we live in a truly capitalist society, but I would guess that many Americans would say we do, and almost all economists would say that we don't. I know that there is likely no such thing as a pure system of any kind, but I think that in general, we choose to ignore that reality.

It seems to me that when politicians make decisions about trade, like the U.S.'s about tire or China's about chicken feet, they either don't have or are refusing to look at all of the pieces. I'm simply an M.B.A. candidate, taking my very first class in Global Economics, and this kind of behavior seems so clearly harmful to me. I'm sure that government officials have people far better educated than I who can tell them the likely long-term effects of these decisions. Do they just choose not to listen? Is the immediate support of groups like the United Steelworkers union more important than any long term damage to the national economy? If that last one is true, than we really are in trouble as a society. I can't even begin to imagine how to start fixing things.