Question

International business case study please help me to solve the case with sutable answers

U.S. Tariffs on Tire Imports from China In September 2009, President Obama placed a tariff on tire imports from China. The tariff was a response to a rising tide of imports from China and intense lobbying from the United Steelworkers union, which represents 15,000 workers at 13 tire plants in the United States. Tires imported from China are usually low- end models that sell for half the price of American-made, name brand tires. In 2008, the United States imported 46 million tires from China, three times as many as it did in 2004. China's share of the American market leaped from 5 percent to almost 17 percent over the same period, while U.S employment in the industry fell by more than 5,000 and domestic production slumped from 218 million tires to 160 million tires. The United Steelworkers petitioned the International Trade Commission, which is a unit of the U.S. Department of Commerce, for protection. After reviewing the cases, the commission concluded that the surge in Chinese tire imports was causing significant "market disruption" and recommended imposing a three-year tariff on imports of Chinese tires. The Obama administration agreed and placed a 35 percent tariff for one year on tire imports from China, followed by a 30 percent tariff in the second year and a 25 percent tariff in the final year. These tariffs were placed on top of an existing 4 percent import tariff The Chinese quickly objected, calling the tariffs "a serious case of United States was violating World Trade Organization rules, of which both countries were members. For its part, the United States argued that the tariffs were allowed under the terms of a special safeguard provision that was part of U.S. agreement to support China's entry into the WTO in 2001. Under the provision, U.S. companies or workers harmed by imports from China can ask the government for protection simply by demonstrating that American producers have suffered a "market disruption" experienced a surge in imports from China. and arguing that the The WTO's dispute resolution panel quickly took on the case. In December 2010, the panel issued its ruling, finding that the United States "did not fail to comply with its obligations" under world trade agreements and allowing the tariffs to remain. China immediately appealed the ruling. Chinese officials stated the tariff had hurt the interests of both China and the United States. They argued that the tariffs cost jobs in the U.S. sales sector, causing some small and medium -size wholesalers and dealers to go out of business. Moreover, they argued that the tariff has burdened low-ncome consumers in the United States, with the average price of tires increasing 10 to 20 percent since the tariffs were imposed. For its part, the United Steelworkers argued that the tariff had been a big success. For the first six months after the tariffs were imposed, U.S. production increased more than 15 percent, and the union claimed that U.S. producers were making plans to add additional capacity. During the same period, tire imports from China fell by 34 percent. However, the union may have been too quick to claim victory. Over the next 18 months, tire imports surged from Thailand, Indonesia, and Mexico, suggesting that low-cost producers in other countries were talking advantage of the tariffs on Chinese tires to increase their exports to the United States. Furthermore, U.S. producers did not add capacity. Indeed, several U.S. tire makers have factories in China and elsewhere and had, for some time, been exporting from them. To complicate matters, China responded to the tariffs on tires by placing tariffs on the export of some U.S products, such as broiler chickens, to China. ve factorsspd Case Discussion Questions: 1. Which groups benefited from the imposition of U.S. tariffs on Chinese tire imports? Which group suffered? What does this tell you about tariffs in general? On behalf of the United States policy maker, how strategy) if the Chinese had raised tariff rates on the importation of certain goods from the United States? 2. would you have reacted (formulated the counter What does the rise of tire imports from Thailand, Indonesia, and Mexico during 2010 and 20 you about the value of this kind of trade polticy? Do you think that the policy was in the best interests of the United States? Justify your answer

Answer 1

Solution 1

Imposition of tarriffs led to successfull emergence of exports from Thailand, Mexico and Indonesia at low cost.

Solution 2

It is in best interest forboth nation to ceasefire any trade war or simply reach common ground to decide on level if imports and exports by effective contract obligation and protocols.

Solution 3

Whenever trade war or import tarriff rates are hiked for one country, it always benefits other countries who export but at relatively lower scale. Also in this case US Manufacturers simply assembled and built products in China and exported from China to make situation worse and thus rendering them ineffective post tarriff hikes. Thus proper legislation and governance is must.

Solution 4

It was in best interest for US since unemployment increased and domestic production decreased which could have created stagflation and hence imposing protectionism was must.