For a president who likes to project the image of the wise, measured ruler, President Obama has showed a shocking amount of ignorance on this issue. First off, how much profit does he think there is for those that import Chinese tires into this country? There might be 25% for an importer, wholesaler, and retailer to split. Now, you are introducing a 35% tariff, which leaves current profits at -10%? Of course, nobody is going to lose 10% on any deal. We do know, however, that low end/bargain pricing will shift higher, and the profit margins will be comparatively microscopic, regardless of your place in the supply chain.

Who does this ultimately hurt? Everyone. When you artificially restrict profit margins, everyone around is affected. The tire industry does not exist in a vacuum. This ruling is harmful to local and regional economies, and it sets the precedent for tariffs on other goods as well. Believe it or not, the ultimate victim will be the consumer. When low-end pricing has to be adjusted, mid-range, and premium tire prices will be boosted as well. In a tight economy, customers are going to delay replacing tires until the last second, increasing the chances of a blowout or other accident.

Now, we haven’t even begun to talk about the political implications of this move. From a foreign relations perspective, this is as bad as it gets (aside from a declaration of war). This move reeks of arrogance on the part of the Obama administration. I’m going to remind you (as China’s leaders will when they meet with President Obama later this month) that they own a good portion of our national debt. In addition, U.S. businesses are making substantial investments in China, as it has a growing consumer base. What are the chances that China will make life significantly harder for these firms?

China will not continue to take this kind of abuse much longer. In a retaliatory move, they have started an investigation into alleged U.S. auto and chicken dumping. Of course, China claims that this is not retaliation, but merely an investigation based on unrelated factors. Look, I know they call us “dumb Americans”, but we’re really not that naive.  China claims that tire tariffs alone will cost them 100,000 jobs and $1 billion in lost revenue. As a nation, China must maintain 8% in economic growth annually just to stay above water.

It is well known that the Obama administration is considering putting a tariff on Chinese steel in place soon, as well. What will they do next, if more sanctions are put in place?  Back in 2007, when we were going to force them into a revaluation of their national currency, they subtly hinted that it would be a shame if anything happened to the USD. Expect more threats, and possibly action along this line, should our President continue to be a thorn in China’s side. This isn’t over, and the world is going to experience some nasty side effects, should this turn out to be a protracted trade war.

Now, am I going to anticipate some of the arguments I will hear from some of you, specifically union workers.

1. Don’t you believe in buying American?

Yes, I do, which is why I don’t shop at Wal-Mart. I’m all for saving money, but Wal-Mart is basically a conduit for Chinese goods that snuffs out competition. By shopping there and saving a buck, you have single-handedly killed more American manufacturing jobs than Chinese tire imports have. (At last count, we have lost 5,100 American tire-related jobs, most of which have been blamed on Chinese imports).

2. Chinese imports killed our jobs, why aren’t you more sympathetic?

I would say that the tire industry related losses are more a function of overall economic losses, and a lack of demand for new cars and trucks. As far as I know, no U.S. auto manufacturer is putting a second or third tier tire on any of their new models. The entire automotive sector is down, mining and construction lost 100,000+ jobs, so OTR production had to be rolled back, or suspended. It’s a lack of consumers, not the presence of a Chinese tire that has decimated tire manufacturing.

3. So, who should we blame?

Ourselves. The time to save manufacturing was years ago. Americans demanded lower prices and higher profits. To do so, we would have to send our labor across the border or across an ocean. In doing so, we shifted from being a nation of producers, to a nation of consumers. We never thought about what would happen when we couldn’t afford to consume anymore. In short, it has nothing to do with the Chinese, it has everything to do with the fact that we are addicted to cheap goods. Manufacturing is gone, and it’s not coming back unless the American worker is willing to work for far less (not that I necessarily think they should).

This entire situation is a lose/lose for everyone involved. Protectionism has never been good policy, and while it may make the USW happy, it won’t bring any jobs back to our shores. It will, however, increase taxes on importers, from current 4% levels up to 39%, diminish profits, and slow overall economic recovery.  I don’t know if we, as a nation, can afford that right now.